BOARD OF COMMISSIONERS Mariyana T Spyropoulos
President Barbara J McGowan
Vice President Frank Avila
Chairman of Finance
Martin J. Durkan Josina Monta
Metropolitan Water Reclamation District of Greater Chicago Debra Shoro
Kari K StfiGle
100 EAST ERIE STREET CHICAGO, ILLINOIS 60611-3154 312.751.5600 David J. Walsh
Jacqueline Torres
Clerk/Director of Finance
312.751.6500 f: 312.894.1104 jacqueline.torres@mwrd.org
June 11,2018
City of Chicago City Clerk 12 I N LaSalle Street Room 107 Chicago, IL 60602
Dear City Clerk Anna Valencia:
; ^ ~V-'
cd 'Enclosed is your requested copy to place on file of the Metropolitan Water Reclamatio'n-iDistfi&'s Comprehensive Annual Financial Report (CAFR) for the year ending December 31, 2017. f2 Sp*
Vepjniriily you
Jacqueline Torres
Comprehensive Annual Financial Report
of THE
metropolitan water reclamation District of Greater Chicago
Chicago, Illinois
For the Year Ended December 31, 2017
I"in:inct I)epartincnt
JACQLKLINK TORRKS, Clerk/Director of Finance
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TABLE OF CONTENTS
I. INTRODUCTORY SECTION Exhibit Page
Board of Commissioners and Principal Officers|910|Organization Chart|910|President's Letter 9
Awards and Achievements Recognition 14
Certificate of Achievement for Excellence in Financial Reporting 16
Clerk/Director of Finance Letter of Transmittal 17
Statement of Responsibility 29
II. FINANCIAL SECTION
l
Independent Auditor's Report 32
Management's Discussion and Analysis (MD&A) - Unaudited 35
Basic Financial Statements
Combined Fund/Govcmmcnt-wide Financial Statements
Governmental Funds Balance Sheets / Statements of Net Position - December 31, 2017
(with comparative amounts for prior year) A-l 54
Statements of Governmental Fund Revenues, Expenditures and Changes in Fund Balances/
Statements of Activities - year ended December 31, 2017 (with comparative amounts for prior year) A-2 56
Fund Financial Statements
General Corporate Fund
Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual
on Budgetary Basis - year ended December 31, 2017 A-3 58
Retirement Fund
Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual
on Budgetary Basis - year ended December 31.2017 A-4 59
Pension and Other Post Employment Benefits Trust Funds
Statements of Fiduciary Net Position - December 31, 2017 (with comparative amounts for prior year) A-5 60
Statements of Changes in Fiduciary Net Position - year ended December 31, 201 7
(with comparative amounts for prior year) A-6 61
Notes to the Basic Financial Statements ' 63
Required Supplementary Information (RSI) Other Than MD&A - Unaudited
Modified Approach for Eligible Infrastructure Assets 116
Schedule of Changes in (he District's Net Pension Liability 121
Schedule of District Contributions 122
Progress in Funding Oilier Post Employment Benefits Trust Fund 123
S u pp I e m e n t a ry I n form a I i o n
Combining and Individual Fund Statements and Schedules
Combining Balance Sheets - Nonmaior Governmental Funds - December 3 1. 2017
(with comparative amounts for prior year) B-1 126
Combining Statements of Revenues. Expenditures and Changes in Fund Balances - Nonmaior
Governmental Funds - year ended December 3 1, 2017 (with comparative amounts for prior year) B-2 127
Exhibit Page
General Corporate Fund-Corporate and Reserve Claim Divisions
Schedule of Appropriations and Expenditures on a Budgetary Basis - year ended December 31, 2017 Schedule of Expenditures by Type - GAAP Basis - year ended December 3 1, 2017 (with comparative amounts for prior year)
Debt Service Fund
Schedule of Revenues, Expenditures and Changes in Fund Balance - Including Comparison of Budget and Actual on Budgetary Basis - year ended December 31,2017
Capital Projects Funds
Schedule of Appropriations and Expenditures on Budgetary Basis - year ended December 31, 2017 Trust Funds
Pension and Other Post Employment Trust Funds - Combining Statements of Fiduciary Net Position December 31, 2017 (with comparative amounts for prior years)
Pension and Other Post Employment Trust Funds Combining Statements of Changes in Fiduciary Net Position Year ended December 31, 2017 (with comparative amounts for prior years)
III. ST ATISTICAL AND DEMOGRAPHICS SECTION - UNAUDITED
C-l C-2
D-l
F-l
F-2
130 140
144 146
150
151
Net Position by Component
Changes in Net Position
Fund Balances: Government Funds
Changes in Fund Balances: Government Funds
Equalized Assessed Value, Direct Tax Rate and Estimated Actual Value of Taxable Property District Direct Property Tax Rates, Overlapping Property Tax Rates of Major Local Governments,
and District Tax Levies by Fund Principal Property Taxpayers Property Tax Levies and Collections User Charge Rates
Ratios of Total General Bonded Debt and Net Bonded Debt Outstanding Estimate of Direct and Overlapping Debt Computation of Statutory Debt Margin Demographic and Economic Statistics Principal Employers
Budgeted Positions by Fund/Department Operating Indicators Capital Asset Statistics
IV. SINGLE AUDIT SECTION
1-1 1-2 1-3 1-4 1-5
1-6 1-7 1-8 1-9 I-10 1-11 1-12 1-13 1-14 1-15 1-16 1-17
156 158 160 162 164
165
166
167
168
170
171
172'
174
175
176
177
178
Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards
Independent Auditors' Report on the Schedule of Expenditures of Federal Awards Independent Auditors' Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance
Schedule of Expenditures of Federal Awards - year ended December 31. 201 7
Notes to Schedule of Expenditures of Federal Awards - year ended December 3 1. 2017
Schedule of Findings and Questioned Costs
ISO 182
184 186 187 190
I.
INTRODUCTORY
SECTION
A nearly complete Stage I ofthe McCook Reservoir, one of three reservoirs in the MIVRD \ TARP system, is seen in this aerial photo from August 2017. Completed at the end of 2017, McCook Reservoir Stage 1 has the capacity to contain 3.5 billion gallons.
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Metropolitan Water Reclamation District of Greater Chicago
Board of Commissioners and Principal Officers
Board of Commissioners:
Honorable Mariyana T. Spyropoulos, President Honorable Barbara J. McGowan, Vice President Honorable Frank Avila, Chairman, Committee on Finance Honorable Timothy Bradford Honorable Martin J. Durkan Honorable Josina Morita Honorable Debra Shore Honorable Kari K. Steele Honorable David J. Walsh
Principal Officers:
David St. Pierre, Executive Director Mary Ann Boyle, Treasurer Allison Fore, Public and Intergovernmental Affairs Officer Darlcnc A. LoCascio, Director of Procurement and Materials Management Eileen M. McElligott, Administrative Services Officer Susan T. Morakalis, General Counsel John P. Murray, Director of Maintenance and Operations Catherine A. O'Connor, Director of Engineering Edward W. Podczcrwinski, Director of Monitoring and Research Beverly K. Sanders, Director of Human Resources John H. Sudduth, Director of Information Technology Jacqueline Torres, Clerk/Director of Finance
Main Office 100 East Erie Street Chicago, Illinois 60611
INTRODUCTORY SECTION 7
Metropolitan Water Reclamation District of Greater Chicago
Organization Chart
Cook County Taxpayers
Boa Commis (elec rdof >sioners :ted)
Civil Service Board
Executive Director
General Administration
Monitoring & Research Procurement & Materials Management Human Resources Information Technology Law Finance Engineering Maintenance & Operations
2,042 Budgeted Positions in 2017
8 INTRODUCTORY SECTION
Metropolitan Water Reclamation District of Greater Chicago
President's Annual Message 2017
Over the past three years as president of the Metropolitan Water Reclamation District of Greater Chicago (MWRD) Board of Commissioners, I have had the pleasure of watching the MWRD exceed expectations in improving our environment. During that time, we have taken major steps toward fulfilling our vision statement of "Recovering Resources, Transforming Water." Certainly the pinnacle of these 2017 achievements is the opening of the McCook Reservoir Stage. I, the last of three reservoirs constructed to protect the area waterways from pollution and mitigate flooding. When completed, this reservoir will be the largest of its kind in the world, providing 10 billion gallons of storage. Here is the annual review of other significant accomplishments this year.
Mariyana T. Spyropoulos
President ofthe Board of Commissioners
We had an award winning year
The Water Environment Federation (WEF) honored our work by bestowing us with three major awards at the world's largest annual water quality event, the Water Environment Federation Technical Exhibition and Conference (WEFTEC). The MWRD received two awards both for the completion of the Calumet System of the Tunnel and Reservoir Plan (TARP), as well as a Project Excellence Award for the completion of the nutrient recovery facility at our Stickney WRR The nutrient recovery facility transformed the largest water reclamation facility in the world into a resource recovery facility.
The District received three awards for our creative use of 1.8 million cubic yards of overburden materials from McCook Reservoir which created Centennial Hill After winning a statewide award for mined land reclamation from the Illinois Department of Natural Resources (IDNR), the MWRD received the Interstate Mining Compact Commission's Kenes C Bowling National Mine Reclamation Award. The National Association of State Land Reclamationists recognized Centennial Hill for Best Innovation in Mining In keeping with our efforts to recover and reuse resources, we are proud to be recognized for successfully reclaiming mined land
We were recognized by the Illinois Water Environment Association and WEF as water leaders from across the state. I was honored to receive the Public Official Award, and the Laboratory Analyst Award was given to Assistant Director of Monitoring and Research Donna Coolidge.
We received three more awards for our shared role in implementing UV technology to improve water quality at our O'Brien WRP. The awards include: the American Academy of Environmental Engineers and Scientists 2017 Honor Award for Design, the American Council of Engineering Companies (ACEC) National Recognition Award; and the ACEC of Illinois Honor Award, which recognizes exceptional engineering projects that benefit the public welfare. The O'Brien WRP uses UV technology to disinfect water as a final layer to its treatment process to reduce pathogenic bacteria in the water being released from the plant into the North Shore Channel. It is considered the largest wastewater treatment UV installation in the world.
Our flood solutions plan for Chicago's South Side claimed the Innovation Award from the Illinois Association for Floodplain and Stormwater Management. The award was presented for work on a pilot stormwater management study that focused on urban flooding in a 17-square-mile residential area covering portions of eight city of Chicago wards on the South Side. The study evaluated how best to scale up green infrastructure (Gl) within the urban landscape of Chicago to eliminate basement backups and alleviate street flooding.
Wc implemented a new compost and yard waste program
Our Monitoring & Research Department introduced two new programs this year. This summer, we began offering exceptional quality compost at two locations. Our compost is a product of water treatment that improves soil quality by supplying organic matter, improving soil structure and porosity for a better plant root environment, and retaining nutrients longer which allows plants to more effectively utilize them. This blend is effective, economical and already popular with gardeners, park districts, golf courses and landscapers. In fact, the compost had a dramatic effect on an unused piece of property in Franklin Park, turning it into a garden with 12-foot sunflowers and 18-inch corn husks. We also provided 110 tons of compost in collaboration with the Cook County Sheriff's office, the Ford Heights Park District, the Baseball Tomorrow Fund, Cubs Charities, James McHugh Construction, the U S Army Corps of Engineers and other partners to deliver a state-of-the-art baseball field in Ford Heights. The field provides young baseball players an opportunity to play on a local field instead of having to travel to
neighboring suburbs which previously hampered local involvement. What once was a team of 10 players traveling without a home field expanded to a league of five teams consisting of 55 11- and 12-year-olds playing ball games on their regulation-size youth baseball field.
In September, we delivered 300 tons of compost to the Skokie Park District for the construction of a youth soccer field that will be unveiled next year. We have also partnered with other municipalities and park districts to distribute this sustainable resource that improves soil structure and is beneficial to our environment.
The second program pertains to our acceptance of yard waste and other organic materials to help produce the compost. Municipalities, park districts, landscape maintenance companies, yard waste haulers, tree trimming companies and utilities looking to unload bulk piles of woodchips are invited to participate in the program.
We pursued water reuse
In keeping with our resource recovery model, the MWRD Board of Commissioners agreed to establish an introductory price of $1 per thousand gallons for the clean water we produce with the flexibility to adjust the price based on market conditions. Water reuse involves recycling treated water for beneficial purposes such as agricultural and landscape irrigation, industrial processes, toilet flushing, and replenishing the ground water basin. In addition to being harnessed, water itself is also reused directly through the MWRD treatment process Every day, 15.1 million gallons are reused in pipeline flushing, blower motor cooling, post-centrifuge centrate flushing and tank cleaning. When used appropriately, recycled water can satisfy many water demands while presenting financial savings and promoting water conservation by decreasing the diversion of water from sensitive water bodies like Lake Michigan. We are exploring partnerships and different opportunities to ensure this water can find new opportunities which will, in turn, strengthen our role as stewards of our water environment
We continued restoring the canopy
We continued our popular program. Restore the Canopy Plant a Tree, designed to help Cook County and its residents manage an increasing load of stormwater and replace the tree canopy that has been devastated by the emerald ash borer and severe weather Besides greening our communities, the trees assist in stormwater management by absorbing stormwater and lessening the load to our sewer systems. I'm pleased to report that since the program started in mid-2016 we have distributed more
10 INTRODUCTORY SECTION
A ribbon cutting ceremony to mark the completion of the 3.5 billion gallon McCook Reservoir Stage 1 was held December 4, 2017. Stage I is estimated to provide $114 miilion per year in flood reduction benefits to 3.1 million people in Chicago and 36 other communities When McCook Reservoir Stage II is completed, the reservoir will have a total storage capacity of 10 billion gallons and deliver an estimated total of $143 million per year in flood reduction benefits.
than 42,000 saplings. To aid in this effort, the MWRD partners with dozens of municipalities, schools, and community groups to distribute the trees.
Wc continued our partnership with the Space to Grow program
Our award winning Space to Grow program gained widespread national recognition when the US Water Alliance acknowledged this partnership for its ability to maximize environmental and community benefits through the transformation of local schoolyards. The collaborative program converts Chicago schoolyards into community spaces for physical activity, outdoor learning, environmental literacy and engagement with art, while also addressing neighborhood flooding issues The projects serve a vital purpose in educating school communities about the value of green infrastructure. Our engineers are sharing their design expertise in planning for the next five schools to be built in 2018 The Space to Grow program was highlighted in the national briefing paper, An Equitable Water Future," as a case study that exemplified how water infrastructure investments
can lead to neighborhood revitalization. The Space to Grow project was named one of the Top Projects for 2017 by Storm Water Solutions magazine.
We hosted two diversity outreach vendor fairs
To expand and maximize business opportunities for local Minority Business Enterprises (MBE), Women Business Enterprises (WBE) and Small Business Enterprises (SBE), we welcomed hundreds of contractors, consultants, subcontractors and potential vendors during two vendor outreach fairs Participants met with MWRD officials and other firms to learn how to register as a vendor and secure work opportunities with contractors and the MWRD.
We began accepting liquid waste for enhanced biological phosphorus removal (KBPR)
r
We began removing and recovering phosphorous from our treated water In May. the MWRD began accepting liquid waste
INTRODUCTORY SECTION 11
from local breweries as well as sugary and starchy liquid wastes. What makes this waste special for the EBPR process is the readily biodegradable carbon that serves as food for the phosphorus accumulating organisms that work under anaerobic and aerobic conditions in the secondary treatment.
Wc helped launch Overflow Action Days
We joined the Friends of the Chicago River in launching the Overflow Action Days initiative to educate area residents to use less water at home when weather forecasts predict significant rain, thus giving sewers more capacity to handle rain and improving our water environment. Overflow Action alerts remind people to conserve water before and during rain events. Actions such as delaying showers or reducing their duration, flushing less, and waiting to run the dishwasher can help reduce the amount of water in the sewer system. If our residents keep water from entering the water treatment system, there will be more space in the sewers to accommodate rain water and our waterways will be cleaner. We were reminded throughout the year of the importance of conserving water at home after several significant rain events impacted our region.
We celebrated
We believe in paying tribute to significant groups and occasions throughout the year. This year we celebrated African American History Month by inviting a panel of former aldermen that served under Mayor Harold Washington
During National Engineers week February 19-26, the many contributions of engineers were commemorated by the MWRD Board of Commissioners through a resolution celebrating National Engineers Week Engineers Week provides an opportunity for engineering professionals to extol their impact on the world and increase public dialogue about the need for future engineers and their work.
In March, the MWRD celebrated Women's History Month to honor the more than 500 women employed by the MWRD Three employees received specific recognition for contributions in their respective fields as supervising environmental specialist, environmental chemist, and engineering technician
As part of our annual recognition for Veteran's Day, we honored the military service of Secretary of State Jesse White and Assistant Director of Illinois Department of Veteran's Affairs Harry F. Sawyer. As with all of our men and women who serve, we are thankful to Secretary White, Assistant Director Sawyer, and our own district employees who served, for their sacrifice on behalf of this country.|1010|We educated
We participate in more than 100 community events every year to discuss our work. In addition to providing tours of the McCook Reservoir and our facilities, commissioners and staff give hundreds of presentations throughout the county. This year, the MWRD facilitated WaterPalooza and an outdoor garden construction event at Manierre Elementary School to kick off WEFTEC 2017 in September. WaterPalooza is a fun day of hands-on environmental activities for students and teachers. The following day, volunteers and water experts transformed a paved, flood-prone area into an outdoor classroom that will also capture stormwater. MWRD coordinates this effort every other year with other government agencies, elected officials and water companies. Manierre School is also our Working in the Schools (WITS) partner where MWRD staff visitonce a week to read to students.
We held our fifth annual Sustainability Summit at the Stickney Water Reclamation Plant (WRP) in October. This event offers local government leaders, park districts, landscapers and others to learn about our initiatives, specifically our biosolids and new compost program.
In pursuit of our ongoing goal of providing safer and cleaner waterways, the MWRD set up permanent collection boxes for safe disposal for unused and expired medication at four locations. We also continue to partner with the U.S. Drug Enforcement Agency's National Prescription Drug Take Back Days.
MWRD produced a new brochure entitled "A healthy waterway begins with you: A Guide to Water Wellness.' Readers are encouraged to consider how they can make lifestyle modifications that will result in fewer contaminants entering the waterways.
Commissioner Timothy Bradford Passes
Commissioner Timothy Bradford passed away suddenly on December 1. Tim was not only a colleague, but a mentor, a confidant, an entertainer, and most importantly, a dear friend. He was larger than life, and his passing has left our Board shocked and saddened Tim was a proud man He was proud of his family, proud of his work in the community, proud of the help he was able to give to so many people throughout his life. And we, the Metropolitan Water Reclamation District, are so very proud to be able to claim him as one of our own Tim. we love you, we miss you, and we promise to carry on the important work you did for the people of Cook County
12 INTRODUCTORY SECTION
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Metropolitan Water Reclamation District of Greater Chicago
Multi-Year Awards 1975-2016
Government Finance Officers Association ofthe United Stales and Canada Certificate of Achievement for Excellence in Financial Repot ting/Comprehensive Annual Financial Report
1993-2016
Government Finance Officers Association ofthe United Stales and Canada Certificate of Achievement for Excellence in Financial Reporting Award for Retirement Fund's Comprehensive Annual Financial Report
1985-2017
Government Finance Officers Association ofthe United States and Canada Award for Distinguished Budget Presentation
2007-2016
Government Finance Officers Association of the United States and Canada Certificate of Achievement for Excellence in Financial Reporting Award for the Retiree Health Care Trust Fund's Comprehensive Annual Financial Report
Individual Year Awards (partial listing) 2014
Academy of Interactive and Visual Arts The Interactive Multimedia Communicator Award for "National Save for Retirement Week Campaign "
Center for Active Design
Excellence Award (Honorable Mention) for the Space to Crow program, a collaboration between the District. Chicago Public School Systems, and the City of Chicago Department of Water Management. Space to Grow was the only submission from Chicago to be recognized Fellow award recipients span the globe.
Illinois Association for Floodplain and Stormwater Management Sustainability Award for the Space to Grow program for the redevelopment of four school properties using a variety of Best Management Practices for creating green space
National Association of Clean Water Agencies, formerly known as Association of Metropolitan Sewerage Agencies Excellence in Management Platinum Award for excellence m utility management and successful implementation of programs that address the range of management challenges facing public wastewater utilities in today's competitive environment
National Physical Plan Alliance Champion Award for the Space to Grow program for the collaborative efforts ofthe District. Chicago Public Schools, and the Department of Water Management in transforming Chicago s underused and outdated schoolyards into vibrant outdoor spaces that benefit students, communities and the environment
United States Green Building Council Emerald Award for the Space lo Grow Program in the Chapter Mission category recognizes the impact collaborations can have m building better, brighter, and healthier spaces to live, learn and work
2015
Chatham Business Association Partner Award
Construction Industry Service Corporation (CISCO) Public Body of ihe Year
Pro/ect ofthe Year - Infrastructure category for.constructing the Wet Weather Treatment Facility and Reservoir
at the Lemont Water Reclamation Plant
Government Finance Officers Association ofthe United States and Canada Budget dot itmcnl received outstanding in the overall category ol Coniniiinir alums Device
United States Green Building Council Best of Given Schools Award foi Collaboi ation. Space lo Grow Parmership
2016
American Infrastructure Magazine; American Public Works Association: American Public Works Association. Chicago Metro Chapter, American Society of Civil Engineers - Illinois Section, Water and Wastes Digest PUBBY Award for Water Project of the Year- Thornton Composite Reservoir Pro/eel ofthe Year for the Thornton Composite Reservoir Outstanding Civil Engineering Achievement Award. Over S-5 Million Category, for the Thornton Composite Reservoir
Top Pro/eels for 2016 Award
14 INTRODUCTORY SECTION
Metropolitan Water Reclamation District of Greater Chicago
American Society of Civil Engineers - Illinois Section Outstanding Civil Engineering Achievement Award, Under $10 Million Category, for the Basse Reservoir South Dam Modification Project
Federation of Women Contractors Advocate ofthe Year Award
. Friends ofthe Chicago River Chicago River Blue Awards Green Ribbon Award for Disinfection at the Calumet Water Reclamation Plant and O 'Brian Water Reclamation Plant and Thornton Reservoir
Illinois Department of Natural Resources Illinois Mined Land Reclamation Award in the non-coal category for the Thornton Composite Reservoir
Illinois Water Environment Association Best Presentation Award, "Biosolids Beneficial Reuse Programs: SWOT and PEST Evaluations to Ensure Sustainability"
National Association of Clean Water Agencies, formerly known as Association of Metropolitan Sewerage Agencies
Utility ofthe future Today Recognition NACWA Award for Compliance with National Pollutant Discharge Elimination System Platinum Award for 25 consecutive years of full compliance for Calumet Water Reclamation Plant Platinum Award for 20 consecutive years of full compliance for Lemont Water Reclamation Plant Platinum Award for 12 consecutive years of full compliance for James C. Kiric Water Reclamation Plant Platinum Award for 11 consecutive years of full compliance for Terrence J. O'Brien Water Reclamation Plant Platinum Award for 9 consecutive years of full compliance for Hanover Park Water Reclamation Plant
National Association of Flood and Stormwater Management Agencies (NAFSMA) Green Infrastructure Award. First Place in the Large Agency Category for the Space to Grow Program
Risk and Insurance Magazine
Honorable Mention. Theodore Roosevelt Workers' Compensation and Disability Management (TEDDY) Award competition for excellence in safety and workers' compensation risk management
Stormwater Solutions Magazine Top 10 Stormwater Project for the Blue Island Green Infrastructure Project
2017
American Council of Engineering Companies of Illinois Special Achievement Water Resources Award for the Wescolt Park Stormwater Storage Facility Project in the Village of Northbrook
Friends ofthe Chicago River Chicago River Blue Awards Green Ribbon Award for the Wescolt Park Stormwater Storage Facility Project in the Village of Northbrook
Illinois Association for Floodplain and Stormwater Management Flood Reduction Project Award for Floodway Buyouts in the Village of Glenvie.w
Illinois Department of Natural Resources Illinois Mined Land Reclamation Award in the non-coal category for the McCook Composite Reservoir
Illinois Water Environment Association Mariyana Spvropoitlos, President, is the recipient ofthe annual Public Official of the Year award, for sign/fit ant contribution in the areas of clean water legislation, public policy, government service, or another area o) public prominence that resulted in improvements lo the water environment
Interstate Mining Compact Commission Kcues C Bowling National Mine Reclamation Award for the McCook Reservoir
National Institute of Governmental Purchasing 2017-2003 Outstanding Agency Accreditation Ac hievemcnl Award
Water Environment Federation Project Excellence Award for the Nutrient Recovery Facility al the Slickney Water Reclamation Plain Water Quality Improvement A\\aid for the Calumet Tunnel and Reservoir Plan Schroe/ifer Innovative Facility Design Medal for lite Calumet Tunnel and Reservoir Plan
INTRODUCTORY SECTION 15
Government Finance Officers Association
Certificate of Achievement for Excellence in Financial Reporting
Presented to Metropolitan Water Reclamation District of Greater Chicago, Illinois
For its Comprehensive Annual Financial Report for the Fiscal Year Ended
December 31,2016
Executive Director/CEO
Jacqueline Torres
Clerk/Director of Finance
312.751.6500 f: 312.894.1104 jacqueline.torres@mwrd.org
May 11,2018
To the Citizens ofthe Metropolitan Water Reclamation District of Greater Chicago and to the Financial Community:
The Comprehensive Annual Financial Report (CAFR), of which this transmittal letter is a component, has been prepared in accordance with Chapter 70, Illinois Compiled Statutes, Act 2605/5.13, for the fiscal year ended December 31,2017. This statute requires that the Clerk/Director of Finance prepare and publish the financial statements and any other data necessary to reflect the true financial condition and operations ofthe Metropolitan Water Reclamation District of Greater Chicago (the District) within six months ofthe close of each fiscal year.
The CAFR's basic financial statements have been prepared in conformance with generally accepted accounting principles (GAAP) in the United States of America, promulgated by the Governmental Accounting Standards Board (GASB). In accordance with Chapter 70, Illinois Compiled Statutes, Act 2605/5.12, the District's basic financial statements for the period ended December 31, 2017, have been subject to an audit by independent accountants. The unmodified opinion ol'RSM US LLP has been included in the Financial Section of this report.
District management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these representations, management ofthe District has established a comprehensive internal control framework that is designed both to protect the government's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation ofthe District's financial statements in accordance with GAAR The cost of internal controls should not outweigh their benefits; therefore, the District's comprehensive framework of internal controls has been designed to provide reasonable assurance, rather than absolute assurance, that the financial statements will be free from material misstatement. Management understands the risks of financial processing and has implemented procedures to evaluate the effectiveness of these controls. District management and Internal Audit staff continually evaluate the internal control structure.
Both the investment community and taxpayers rely on the CAFR for basic information about the District, its past performance, current financial condition, future plans, and services provided. Financial data and the facts contained herein create an indispensable profile for potential bond investors. Taxpayers can, with full confidence, assess the level, efficiency, and effectiveness ofthe services provided and the related costs.
GAAP requires thai management provide a narrative introduction, overview, and an analysis to accompany the basic financial statements in the form of a Management's Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. T he District's MD&A can be found immediately following the independent auditor's report.
INTRODUCTORY SECTION 17
MISSION STATEMENT
The District will protect the health and safety ofthe public in its service area, protect the quality ofthe water supply source (Lake Michigan), improve the quality of water in watercourses in its service area, protect businesses and homes from Hood damages and manage water as a vital resource for its service area. The District's service area is 882.1 square miles of Cook County, Illinois. The District is committed to achieving the highest standards of excellence in fulfilling its mission.
BACKGROUND
The District was originally organized as the Sanitary District of Chicago in 1889 under an act of the Illinois General Assembly. The enabling act was in direct response lo a typhoid and cholera epidemic. The District reversed the How ofthe Chicago and Calumet River systems to divert contaminated water from Lake Michigan so it could be diluted as it flowed downstream into the Mississippi River. Subsequently, the District built collection treatment facilities to treat sewage in an environmentally effective manner.
The District operates primarily within the boundaries of Cook County. Although the District exercises no direct control over wastewater collection and transmission systems maintained by cities, towns, and villages in Cook County, it does control municipal sewer construction by permits in suburban Cook County. Furthermore, the District provides the main sewer lines for the collection of wastewater from local sewer systems together with the treatment and disposal thereof. Combined sewage and stormwater runoff is stored, treated, and released using District facilities. The District owns and operates seven water reclamation plants (WRP) and 23 pumping stations that treat an average of 1.3 billion gallons of wastewater each day. The Central (Stickney) WRP is the largest plant in the world. The District controls approximately 76.1 miles of navigable waterways that serve as headwaters ofthe Illinois Waterway system. Stringent federal and state standards require that the District's wastewater treatment processes keep the waterways free of pollution. The District monitors industries in Cook County to assure that hazardous substances not suitable for a sewer are disposed of in an environmentally responsible way that complies with applicable laws.
The multi-award winning Metropolitan Water Reclamation District of Greater Chicago is headed by the Board of Commissioners who determine its policies. (Sealed L to R) Vice President Barbara J. McGowan. President Mariyana T. Spyropoulos and Chairman of Finance Frank Avila (Standing L to R) David J Walsli. Kari K Steele. Debra Shore. Timothy Bradford, Josina Mania and Martin ./. Diirkan.
18 INTRODUCTORY SECTION
REPORTING ENTITY
T he District is governed by a nine-member Board of Commissioners, elected at large for six-year terms. The terms are staggered so that three commissioners are elected every two years. The Executive Director, who is appointed by the Board of Commissioners, manages and controls all District operations and serves as the Chief Executive Officer.
The District is a separate legal entity sharing an overlapping tax base with the City of Chicago, the Chicago Board of Education, the County of Cook, the Cook County Forest Preserve District, the Chicago Park District, the Chicago Public Building Commission, the Cily Colleges of Chicago, and various municipalities and school districts outside the City of Chicago but within the District's boundaries. However, these governments do not meet the established criteria for inclusion in the reporting entity and are therefore excluded.
Improve Water Quality
The District cost effectively collected and treated approximately 453.7 billion gallons of wastewater from businesses and homes and captured stormwater runoff from its service area. Our performance for treating this wastewater approaches 100 percent compliance with all applicable effluent standards at all water reclamation plants. Disinfection technology has been implemented and placed into service at two plants using multiple cost-effective strategies. Chlorination/de-chlorination has been implemented at the Calumet Water Reclamation Plant and ultraviolet technology at the O'Brien Water Reclamation Plant.
Provide Stormwater Management
Flooding continues to be the number one issue facing the District. The Stormwater Management Program is aggressively working to minimize flooding damage by helping communities with local flooding issues, acquiring flood-prone properties, and partnering with municipalities or other local governments on large capital green infrastructure projects. Since 2004 the District has distributed more than 139,800 low-cost rain barrels, and in 2017, the District distributed more than 42,000 tree saplings as a part ofthe "Restore the Canopy, Plant a Tree" initiative.
The District undertakes stormwater management projects under two phases of its Stormwater Management Program. Phase 1 consists of projects identified under Detailed Watershed Plans (DWPs), which were completed in 2010. Phase I projects address regional waterway overbank flooding and streambank stabilization concerns. The District performed construction work on three Phase I projects in 2017, two of which were substantially completed. It is anticipated that an additional eight Phase I projects will begin construction in 2018. The design of two Phase 1 projects were completed in 2017 and are scheduled to begin construction in 2019. '
The District initiated Phase II of its Stormwater Management Program in 2013 to address local Hooding problems not necessarily involving overbank flooding. Since then, the District accepted 40 Phase 11 projects into its program in order to assist communities and agencies across Cook County in addressing flooding issues. Since 2014, a total of 17 shovel ready projects were completed with partial District funding. Construction on one Phase II conceptual design project will begin in 2018 while another conceptual design project may start construction later that year. The remaining 21 projects (12 conceptual and 9 shovel ready) are currently in cither preliminary, final design, or construction. It is anticipated these projects will complete construction or start construction in 2018 and beyond.
For circumstances where a flood control project is not feasible, the District initiated a Flood-Prone Properly Acquisition Program in 2015 and has partnered with nine local municipalities in order to remove nearly a total of 200 structures from the floodplain. Once all 200 properties have been removed, deed restrictions will be imposed and recorded, requiring the properties to remain as open space into perpetuity. The municipalities will own the acquired properties and perform all required maintenance. In late 2017. the District initialed another call for Flood-Prone Properly projects and will soon partner with additional municipalities to remove more properties from the floodplain.
On October 3, 2013, the District's Board of Commissioners adopted the Watershed Management Ordinance (WMO). which replaced the Sewer Permit Ordinance and established uniform, minimum, countywide stormwater management regulations for new development and redevelopment in Cook County. Components regulated under the WMO include drainage and detention, volume control, floodplain management, isolated wetland protection, riparian environment protection, and soil erosion and sediment control. The WMO became effective on May 1, 2014. The siormwater management regulations ofthe WMO serve to prevent the Hooding situation in Cook County from worsening through
INTRODUCTORY SECTION 19
development or redevelopment. Over 1,200 WMO permits have been issued to date. Since the development of the WMO, the District has conducted numerous training events in addition to presenting at various seminars and conferences hosted by professional organizations.
Provide flood protection with Tunnel and Reservoir Plan and Green Infrastructure
The primary goals of TARP are as follows: protect Lake Michigan, the area's primary source of drinking water from polluted backflows; clean up the area's waterways; and provide an outlet for floodwater and rainfall runoff by capturing wastewater before it enters streams and rivers from within the District's service area. TARP consists of 109.4 miles of deep rock tunnels designed to capture 2.3 billion gallons ofthe first flush of sewage contaminated stormwater from combined sewers which had previously flowed into the area waterways.
The flood control segment of TARP consists of three storage reservoirs to serve as outlets for combined sewer overflows (CSO's). The three reservoirs - Gloria Alitto Majewski, Thornton, and McCook - will provide 15.2 billion combined gallons of storage for CSO's that otherwise would spill into local waterways, degrading the water quality and causing Hooding. The Gloria Alitto Majewski Reservoir, the smallest ofthe three, was completed in 1998 al a cost of $45 million and has prevented over 5.7 billion gallons of combined sewer overflow from entering the waterways and mitigated over $400 million in flood damage. The Thornton Composite Reservoir became operational in 2015 and, through the end of 2017, more than 14.4 billion gallons have been captured during 32 fill events. The first stage ofthe McCook Reservoir was completed in 2017 and the second stage will be completed in 2029. The McCook Reservoir is projected to bring SI43 million per year in flood reduction benefits to its residents when fully completed. The combined engineering, construction and land rights cost for all three reservoirs is estimated at $1.48 billion, with the Corps and the District providing approximately $540 million and $940 million, respectively.
MWRD Commissioners display a commemorative plaque that was installed on a large fragment of -11)0 million year old dolomite limestone thai was mined from the newly completed McCook Reservoir Stage I. (L-Rl Commissioner Kan K Steele. President Mariyana T. Spvr<>poulos, David.I. Walsh. Martin J. Durkiin. Chairman of Finance l-'rank Avila, Debra Shore and Vice President Barbara .1. McGowan
20 INTRODUCTORY SECTION
TOTAL
$1,142 658 64 469
40.5
36.7
ae
25.6
SYSTEM
$2,333
109.4
MAINSTREAM CALUMET OHARE DESPLAINES
RESERVOIRS
STORAGE CAPACITY (BILLION GALLONS) TOTAL COMPL
TOTAL COSTS
$1,030 418 46
10.00 4.80 6.35
TOTAL
McCOOK
THORNTON
15.15
$1,493
MAJEWSKI
TOTAL
(ALL COSTS N MILLIONS)
LEGEND:
nam tunnel r completed
^} STORAGE RESERVOIR PHASE IIA2UP COMPLETED
STORAGE RESERVOIR PHASE ll/CUP PARTLY COMPLETED
| | WATER RECLAMATION PLANT
0 PUMPING STATION (ON-LINE)
cook coumr y
TUNNEL and RESERVOIR PLAN PROJECT STATUS
A consent decree between MWRDGC and the U.S. Department of Justice was entered into in 2014. One section of the consent decree is designed to foster the use of green infrastructure controls to reduce the amount of stormwater that Hows into the sewer systems during a storm and requires MWRDGC to develop a Green Infrastructure Program Plan, which was approved by the Environmental Protection Agency in 2015. In 2014, MWRDGC partnered with Chicago Public Schools System (CPSS) and the Chicago Department of Water Management (CDWM) to incorporate stormwater retention at four elementary schools while reconstructing substandard playgrounds under a program known as Space to Grow. The projects serve to educate the public on the importance of stormwater management and the value ofgrecn infrastructure to reduce basement backup flooding. The success of this project led to MWRDGC, CPSS, and CDWM to agree to partner on 30 more schools from 2015 through 2020. In 2015 and 2016, five more CPSS school playgrounds were completed, and design is underway for six additional schools to be improved in 2018. The District completed construction of a green infrastructure project in the City of Blue Island, where permeable pavement and rain gardens were installed to combat local Hooding. The District partnered with the City of Evanston to install permeable pavement, swales, and rain gardens at the City's Civic Center, and also partnered with the Village of Wilmette to install four green alleys. In 2016, the District partnered with the Village of Northbrook in its installation of a green stormwater detention system at Wescott Park, and also partnered with the Village ofKenilworth on rain garden installations. In 2017, the
The Water Environment Federation s Young Professionals Committee worked with community members, teachers and students at Manierre Flementarv School in Chicago to convert a portion ofthe school s asphalt playground into a multipurpose given space and outdoor classroom, featuring native plants and pervious surfaces that will enhance, the property and capture stormwater. Ihe annual WE FT EC event includes a community service project every vear it is in Chicago, with past projects constructed at Haines Elementary School, Pulaski Park I * and Pershing Magnet School in ^" _. .
Chicago " '
22 INTRODUCTORY SECTION
District completed the construction of a permeable parking lot at its John E. Egan Water Reclamation Plant. The District also partnered with the City of Berwyn on a green alley project, and the Village of Niles on a bioswale and permeable parking lot. In 2017, the District also solicited information from Cook County communities and other governmental organizations for additional green infrastructure partnership opportunities. Based on the project submittals received, the District intends to partner on an additional 20 green infrastructure projects throughout its service area beginning in 2018. The consent decree provides an enforceable schedule for implementing MWRDG's Tunnel and Reservoir Plan, which will result in a significant decrease in the volume of water discharged to the waterways from combined sewer overflows in Cook County, along with dramatically reducing the potential for flooding.
Maintenance of Facilities and Infrastructure
The District owns and operates seven water reclamation plants, 560 miles of intercepting sewers and force mains, 109.4 miles of TARP tunnels, 23 pumping stations, 35 flood control reservoirs, and three TARP reservoirs. Through preventative maintenance management, modernization, rehabilitation, and planned replacement, the District will ensure the long-term reliability and cost-effectiveness of operations. To aid planning and prioritize projects for both near term and long term, the District implemented procedures for project vetting and Long-Term Capital Plan evaluation.
Many ofthe District's plants and interceptor sewers were placed in service over 50 years ago. In order to maintain continuous operations, the District has initiated a Capital Improvements Plan to replace physically deteriorating facilities through rehabilitation, alteration or expansion. The expected construction cost over the next five years for the replacement and maintenance of facilities is S126.4 million. As discussed in the MD&A, condition assessments required under the modified approach alert management to the need for maintenance and preservation projects for its infrastructure assets.
RESOURCE RECOVERY
The District understands the obligation lo implement sustainable practices and has maintained that focus for the past few years by investing in research and development of resource recovery programs. The current sustainability effort is focused on recovering phosphorous, biosolids, water, and energy.
Phosphorus
The District had voluntarily sought a phosphorus discharge limitation in our National Pollutant Discharge Elimination System (NPDES) permits and had decided we would pursue achieving this through our biological process. With one of the District's objectives of sustainability, at ihe Stickney WRP, the District is pursuing the recovery of phosphorus. In partnership with Ostara Nutrient Recovery Technologies, startup ofthe world's largest nutrient recovery facility occurred in May 2016 and is in the operational testing phase of the construction contract. Phosphorus is recovered from the plant's liquid waste stream and turned into a fertilizer pellet, which is marketed and distributed. Construction ofthe Waste Activated Sludge Stripping to Remove Internal Phosphorous (WASSTRIP) process began in June 2016. This process will be operational by the spring of 2018 and will further increase the recoverable phosphorous by repurposing existing tanks in combination with the Ostara process to remove magnesium ammonium phosphate from wasted active sludge. Phosphorus and nitrogen recovery will provide significant environmental benefits to the Chicago Area Waterway System and downstream through the Mississippi to the Gulf of Mexico. By taking this approach, the District is recovering a non-renewable resource and placing it back into the food cycle, rather than letting it be diluted and lost to the water environment.
In fulfillment ofthe special provisions ofthe O'Brien Water Reclamation Plant's (OWRP) NPDES permit, the District has created an Algae Research Facility at the OWRP. This facility carries out research on treatment technologies using algae to recover phosphorus from the wastewater. Algae treatment technology has several advantages over the traditional chemical precipitation approach including the ability to recover and reuse the phosphorus, the ability to generate revenue through sale ofthe harvested algae as a raw material for sustainable commodity products, sequestration of atmospheric carbon dioxide, and use of natural energy from sunlight. Currently, the District has promising results from a one-year study from a technology that cultivates algae using a revolving biofilm reactor, and will continue with a larger pilot-scale research project in 2018. In addition, in 2018 the District will be evaluating the results of another year-long bench-scale algae treatment technology thai uses submerged artificial light in a flow-through configuration. Results from these pilot studies will be used to inform the projected performance, life cycle costs, and design criteria for a full-scale installation at the OWRP.
INTRODUCTORY SECTION 23
Staff from the Metropolitan Water Reclamation District of Greater Chicago s Monitoring and Research Department watch ax a tanker truck delivers the first load of brewery waste from Goose Island as part of an ambitious plan to recover phosphorus and promote cleaner waterways.
Biosolids
Due to changes in Illinois law, the District can sell Exceptional Quality (EQ) biosolids and EQ biosolids blend that is composted with wood chips to the general public. By taking this approach, the District is recovering a non-renewable resource and placing it back into the food cycle, rather than letting it be diluted and lost to the water environment. Biosolids can be used almost anywhere that chemical fertilizers are used. The District can also reduce its carbon footprint by reducing significant vehicle traffic as organics will no longer need to be hauled to landfills.
Water
Efforts have been focused on reuse applications for the high quality water produced at the plants and the capture and reuse of stormwater. Reuse opportunities are being explored at the Calumet and Stickney industrial corridors. The District is also exploring reuse at parks and golf courses.
The District is also researching technologies using algae as a means to recover nutrients from wastewater. The algae can be used in a sustainable manner such as compost, aquaculture food supplement, bio plastics, and commercial dyes.
Energy
The District's goal is to achieve energy neutrality by 2023. The anaerobic digesters at the Calumet and Stickney Water Reclamation Plants produce biogas as a natural byproduct ofthe digestion process. The biogas contains methane gas, which is currently used as fuel for the plants' boilers. A significant step towards the District's goal of becoming energy neutral will be the utilization ofthe biogas to produce renewable energy. The Stickney WRP currently utilizes all of their digester gas. Once the existing lmhoff tanks are replaced with Primary Settling tanks, the Stickney WRP is projected to double digester gas production. A plan is in place to fully utilize all of this additional gas production. The digester gas utilization at the Calumet WRP is being reviewed and a utilization plan will be in place m April 201 S. In order to boost biogas production, the District will accept liquid organic wastes, such as restaurant grease and industrial food waste, into the anaerobic digesters under the Resource Recovery Ordinance, which was approved by the Board
24 INTRODUCTORY SECTION
of Commissioners in 2016. To handle the incoming feedstock, a new Liquid Organic Waste Receiving Station will be constructed at the Calumet WRR Design ofthe receiving station is complete. Similar work will occur at the Stickney WRR Existing initiatives are also being examined for further reduction of energy consumption. The District is looking to maximize use of digester capacity al the Stickney WRP. market electrical capacity at Lockport to maximize return on investment and optimize the aeration processes to further reduce energy consumption by 25%.
BUDGET PROCESS
The Board of Commissioners is required to adopt an annual budget no later than the close ofthe previous fiscal year. This annual budget serves as the foundation for the Metropolitan Water Reclamation District's financial planning and control. Annual budgets are prepared for ihe General Corporate, Construction, Capital Improvements Bond, Stormwater Management, and Debt Service Funds.
The District utilizes an enteiprise resource planning computer system to provide budget control at the line item level for the General Corporate, Construction, and Stormwater Management Funds, at the fund level for the Debt Service Fund, arid at the line item class level for the Capital Improvements Bond Fund. All budget-relevant transactions arc tested for the sufficiency of available appropriation before any obligations resulting from purchase requisitions, purchase orders, or contracts are formally recognized, or payments resulting from payroll or other expenditures are released.
ECONOMIC BASE OUTLOOK
The District's service area is sizeable, encompassing 98% of the assessed valuation of Cook County. The Equalized Assessed Valuation (EAV) ofthe District has experienced a .24% average growth rate over the last ten years and the current equalized assessed valuation of $140,752,201,171 is 8.0% higher than the previous year. A strong fund balance, along with an emphasis on controlling expenditures, should allow the District to protect its operations from economically sensitive revenues stemming from fiscal constraints at the federal and state levels. The District operates a fiscally sound organization, maintaining a AAA bond rating with Fitch Ratings and AA+ with Standard and Poor's. Our finances are managed in a prudent manner, as evidenced by our excellent bond ratings, healthy fund balance, and continuing efforts to manage costs. To ensure that the District's finances remain healthy, projects are prioritized to ensure best use of current funding, project base budget targets assure funding above the base are tied lo strategic initiatives, and resources are managed lo ensure financial stability targets arc met.
FINANCIAL POLICIES
In order to protect the strong financial position ofthe District, ensure uninterrupted services, and stabilize annual tax levies, the Board of Commissioners adopted the following policies on December 21, 2006 to enhance and maintain budgetary fund balances. The General Corporate Fund policy was amended on December 10, 2009. The Bond Redemption & Interest Funds Investment Income policy was amended on November 3, 2011. The Stormwater Management Fund policy was adopted on December 10, 2009 and amended on November 3. 2011 and December 17, 2015.
To ensure the long-term financial health of the pension program and other post-employment benefits, the Pension Funding Policy and the amended OPF.B Advance Funding Policy were adopted on October 2, 2014.
General Corporate Fund
Corporate Fund undesignated fund balance as of January I of each budget year is lo be kept between 1 2 percent and 15 percent of appropriations. The fund balance may be maintained by not fully appropriating prior year fund balances. This level of fund balance will ensure the District's ability to maintain all operations even in the event of unanticipated revenue shortfalls and provide time to adjust budget and operations.
Corporate Working Cash Fund must be sufficient to finance 95 percent of ihe full annual expenditure ofthe Corporate Fund. - This will be financed through transfers of surpluses from the Construction Working Cash Fund, direct tax levies, lax levy financed debt (Working Cash Bonds) and transfers of accumulated interest
INTRODUCTORY SECTION 25
I
from other funds. This level of fund balance will continue financing the Corporate Fund in the event ofthe typical and extraordinary delays in second installment real estate tax collections.
• Reserve Claim Fund balance will be targeted toward the maximum level permitted by statute, 0.05 percent of the Equalized Assessed Valuation, whenever economically feasible. This will be financed through tax levies at the maximum 0.5 cents per SI00 of Equalized Assessed Valuation when economically feasible and financially prudent. This level of funding will protect the District in the event that environmental remediation costs cannot be recovered from former industrial tenants of District properties, catastrophic failure of District operational infrastructure or other claims. As the District is partially self-insured, adequate reserves are critical.
The District will appropriate funds from the unassigned fund balance for emergencies as well as for other requirements that the District believes to be in its best interest. In the event that any of these specific component objectives cannot be met, the Executive Director will report this fact and the underlying causes to the Board of Commissioners with a plan to bring the fund balances back into compliance with policy within a two-year period. In order to maintain relevance, this policy will be reviewed every three years following adoption or sooner at the discretion of the Executive Director.
Stormwater Management Fund
The maximum properly lax levy of five cents per $ 100 of Equalized Assessed Valuation for the Stormwater Management Fund shall be allocated at a maximum two cents per SI00 of Equalized Assessed Valuation to fund operations and maintenance expenditures and the remainder ofthe levy shall fund direct cash outflows for capital and capital-related expenditures and the interest and redemption of general obligation bond issues for capital projects.
Capital Improvements Bond Fund Investment Income
Investment earnings from the Capital Improvements Bond Fund resulting from all future bond issues will fund an equity transfer to the Bond Redemption & Interest Funds and be used to abate property tax levies or for other corporate needs. This practice will also limit the payment of arbitrage rebates.
Bond Redemption & Interest Funds Investment Income (Debt Service Fund)
Fund balances in the Bond Redemption & Interest Funds that might accumulate due to investment income will be identified and used to abate Bond Redemption & Interest property tax levies or for other corporate purposes. These abatements appropriately reduce property tax levies by the amount earned on invested balances above what is necessary for paying principal and interest due over the following 12 months, while still maintaining appropriate fund balances and when not required for other corporate purposes. This policy and the subsequent tax abatements will assist in compliance with the Board of Commissioners' overall tax levy policy, which is not to exceed a five percent increase over the prior year, excluding the Stormwater Management Fund tax levy.
Abatement of Interest Rate Subsidies from Build American Bond Issuances
Interest reimbursement payments related to taxes levied for Build America Bond issuances will be presented to the Board of Commissioners for approval to abate, to be used for any lawful corporate purpose, or a combination thereof as determined as part ofthe annual budget process. Such abatement or alternative lawful use ofthe funds will be presented to the Board of Commissioners for approval prior to any abatement or use of reimbursement funds.
Capital Improvements Bond Fund Accumulated Income
Revenues that have accumulated in the Capital Improvements Bond Fund (CIBF) from investment income, grants, or State Revolving Fund revenues will primarily be used for capital projects. Capital projects are generally in Ihe CIBF; however, capital projects m the Construction or Corporate Funds of critical importance may be financed by transfers from this revenue source. These funds may be transferred to the Bond Redemption & Interest Funds lo be used to abate property taxes or may be used for other corporate needs as necessary.
26 INTRODUCTORY SECTION
Accounting Policies of Fund Balance
The General Corporate Fund is a combination of the Corporate, Working Cash, and Reserve Claim Funds. In the General Corporate Fund, the District considers restricted amounts to have been spent first when an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, followed by committed amounts, and then assigned amounts. Unassigned amounts are used only after the other categories of fund balance have been fully utilized. In governmental funds, other than the General Corporate Fund, the District considers restricted amounts to have been spent last. When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, the District will first utilize assigned amounts, followed by committed amounts, and then restricted amounts.
Committed Fund Balance
The District's Board of Commissioners shall establish, modify, or rescind a fund balance commitment by formal action of the Board of Commissioners.
Assigned Fund Balances
The Executive Director may assign amounts of fund balances to a specific purpose. Retirement Fund
The District's Board of Commissioners adopted a Funding Policy recommended by the Retirement Fund Board of Trustees to ensure the long-term financial health ofthe pension program while balancing the interests ofthe employees, retirees, taxpayers, and the District. The funding goal of the policy is to contribute annually to the Fund an amount that will increase the funded ratios to 100 percent by the year 2050. This is to be achieved by accumulating adequate resources for future benefit payments in a manner that fully funds the long-term costs of benefits and reduces volatility in the employer contribution amounts, in accordance with statutory requirements.
OPEB Trust
The OPEB Trust establishes a reserve that will help ensure the financial ability to provide health care coverage for District retirees and their beneficiaries in the future. The Advance Funding Policy for the OPEB Trust Fund, amended in October 2014, reflects a 100 percent funding goal to be achieved by 2027 with no further advance contributions required after 2026. The policy to increase the OPEB liability funding percentage helps to solidify the District's solid financial foundation and makes the retiree healthcare plan sustainable for the long-term.
AWARDS
The Government Finance Officers Association of the United Stales and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Metropolitan Water Reclamation District of Greater Chicago for its Comprehensive Annual Financial Report for the fiscal year ended December 31, 2016. This was the 42nd consecutive year that the Metropolitan Water Reclamation District has achieved this prestigious award. In order lo be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues lo mcel the Certificate of Achievement Program's requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate.
The District has been presented with the award for Distinguished Budget Presentation by the GFOA for the annual budget for the year beginning January 1, 2017. To receive this award, a governmental unit must publish a budget document that meets program criteria as a policy document, financial plan, communications medium, and operations guide. The award, which is valid for a one year period only, has been received for 33 consecutive years.
INTRODUCTORY SECTION 27
ACKNOWLEDGMENTS
Preparation of this report reflects the combined efforts of the dedicated professional personnel of the operating and support departments. Their expertise, enthusiasm, and unswerving focus on excellence are gratefully acknowledged. The general citizenry, in our opinion, may fully rely on the 2017 Comprehensive Annual Financial Report as a fair and accurate presentation, in all material aspects, ofthe financial position and operational results ofthe Metropolitan Water Reclamation District of Greater Chicago.
Respectively submitted.
Clerk/Director of Finance
28 INTRODUCTORY SECTION
May 11,2018
STATEMENT OF RESPONSIBILITY
To the Citizens of the Metropolitan Water Reclamation District of Greater Chicago and to the Financial Community:
The Board of Commissioners and management of the Metropolitan Water Reclamation District of Greater Chicago assume full responsibility in presenting Financial statements that are free from any material misstatements, and are complete and fairly presented in accordance with accounting principles generally accepted in the United States of America. To this end, the undersigned hereby state and attest, having reviewed these financial statements, to the best of their knowledge:
The statements fairly present the financial position and changes in financial position of the Metropolitan Water Reclamation District of Greater Chicago, and its component units, for the fiscal year ended December 31, 2017, in accordance with accounting principles generally accepted in the United States of America;
The statements contain no untrue statement of material facts; and
There are no omissions of material fact(s).
Clerk/Director of Finance Comptroller
INTRODUCTORY SECTION 29
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II.
FINANCIAL SECTION
MWRD skimmer boat "Skim Pickens " arrives to assist with the "Big Jump " event, during which elected officials and representatives from various agencies jumped into the Chicago River at Ping Tom Memorial Park in Chinatown.
¦VI
Independent Auditor's Report
RSM US LLP
To the Honorable President and Members of the Board of Commissioners Metropolitan Water Reclamation District of Greater Chicago
Report on the Financial Statements
We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information of the Metropolitan Water Reclamation District of Greater Chicago (the District), as of and for the year ended December 31, 2017, and the related notes to the financial statements, the respective changes in financial position thereof and the respective budgetary comparisons for the General Corporate Fund and the Retirement Fund for the year then ended, which collectively comprise the District's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Metropolitan Water Reclamation District Pension Trust Fund (Pension Fund), which represents 83 percent and 76 percent, respectively, of the assets and revenues/additions of the aggregate remaining fund information. Those statements were audited by other auditors, whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Pension Fund, is based solely on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
THE POWER OF BEING UNDERSTOOD
AS JO IT : iAX i CONSULTS
32 FINANCIAL SECTION
Opinions
In our opinion, based on our audit and the report of the other auditor, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Metropolitan Water Reclamation District of Greater Chicago, as of December 31, 2017, the respective changes in financial position thereof and the respective budgetary comparisons for the General Corporate Fund and the Retirement Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Other Matters
Prior-Year Comparative Information
The basic financial statements include partial prior-year comparative information. Such information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the government's basic financial statements for the year ended December 31, 2016, from which such partial information was derived. Our audit report on the financial statements for the year ended December 31, 2016, dated May 12, 2017, expressed an unmodified opinion.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that management's discussion and analysis, modified approach information, and pension and other postemployment benefit plans schedules on pages 35-51 and 116-123 be presented to supplement the basic financial statements. Such information, although not a part ofthe basic financial statements, is required by the Governmental Accounting Standards Board which considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit for the year ended December 31, 2017, was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District's basic financial statements. The Combining and Individual Fund Statements and Schedules and the Introductory and Statistical and Demographic Section for the year ended December 31, 2017, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The Combining and Individual Fund Statements and Schedules have been subjected to the auditing procedures applied in the audits of the financial statements for the year ended December 31, 2017, and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America by us and other auditors. In our opinion, based on our audit and that of the other auditors, the procedures performed as described above, and the report of the other auditors, the Combining and Individual Fund Statements and Schedules are fairly stated in all material respects in relation to the basic financial statements as a whole for the year ended December 31, 2017.
FINANCIAL SECTION 33
Our audit report on the financial statements for the year ended December 31, 2016, dated May 12, 2017, expressed an unmodified opinion. The report stated that the Combining and Individual Fund Statements and Schedules for the year ended December 31, 2016, were subjected to the auditing procedures applied in the audit ofthe 2016 basic financial statements and certain additional auditing procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare those basic financial statements or to those basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America and, in our opinion, was fairly stated in all material respects in relation to the basic financial statements as a whole for the year ended December 31, 2016.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District's basic financial statements. The Introductory Section and the Statistical and Demographics Section listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated May 11, 2018 on our consideration of the District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the District's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District's internal control over financial reporting and compliance.
Chicago, Illinois May 11, 2018
34 FINANCIAL SECTION
Management's Discussion and Analysis (MD&A) - Unaudited
Year ended December 31, 2017 Metropolitan Water Reclamation District of Greater Chicago
The Metropolitan Water Reclamation District of Greater Chicago (the "District") is providing Management's Discussion and Analysis (MD&A) to assist the readers in understanding the financial information presented in this report. The MD&A includes a discussion ofthe basic financial statements and their relationship to each other. It also offers an analysis of the District's financial activities at both the government-wide and fund levels, based on known facts, and compares the current year's results with the prior year's. A budgetary analysis ofthe District's General Corporate Fund is provided, as well as an analysis of capital assets and debt activity. Finally, the MD&A concludes with a discussion of issues that are expected to be significant to the District's finances.
The MD&A should be read in conjunction with the Clerk/Director of Finance's letter of transmittal and the basic financial statements.
2017 FINANCIAL HIGHLIGHTS
The District's government-wide net position is $4,616,429,000. This can be attributed to the District's positive balance of 54,710,123,000 in net investment in capital assets.
The District's government-wide net position increased by $76,484,000 and is mostly attributable to the net effect of the increased investment in capital, adding approximately SI 18 million in capital assets offset by the spending of available bond proceeds. In addition, the District had increased tax revenues, interest on investments, grant revenue and a decrease in construction costs. These variances are explained further in the key financial comparisons section.
The District's combined fund balances for its governmental funds at December 31,2017 totaled $820,495,001, a decrease of $62,968,999 from the prior year. The decrease is primarily attributable to not issuing general obligation bonds in 2017 and a decrease in construction costs.
The District's government-wide liabilities increased by $55,532,999 in 2017 which is largely attributable to an increase in converted bond anticipation notes of approximately $30 million, an increase in the net pension liability of approximately $16 million, and a smaller increase in accounts payable and deferred revenue combined of approximately $6.2 million.
DISCUSSION OF THE BASIC FINANCIAL STATEMENTS
The District's basic financial statements include both a short and long-term view of its financial activities. The focus is on both the District as a whole (government-wide) and on major individual funds. The District's basic financial statements include three components: (1) government-wide financial statements; (2) fund financial statements; and (3) notes to the basic financial statements. In addition to the basic financial statements, the financial section of this report includes Required Supplementary Information (RSI) and Combining and Individual Fund Statements and Schedules.
Government-wide financial statements. The government-wide financial statements arc provided to give readers a long-term overview ofthe District's finances, similar to a private-sector business. Government-wide statements consist ofthe Statements of Net Position and Statements of Activities, and are prepared using the accrual basis of accounting and the economic resources (long-term) measurement focus. They include all the District's governmental activities; there are no business-type activities. The fiduciary funds' resources are restricted for employee pensions and other post-employment benefits, and are not available to support the operations ofthe District. Therefore, the fiduciary funds are not reported in the government-wide financial statements.
The Statements of Net Position report the financial position ofthe District as a whole, presenting all the assets and liabilities (including capital assets and long-term obligations) with the difference between the assets and deferred outflows of resources less liabilities and deferred inflows of resources representing net position. The increase or decrease
FINANCIAL SECTION 35
Management's Discussion and Analysis (MD&A) - Unaudited
Year ended December 31, 2017
in net position over time can serve as a useful indicator of whether the financial position ofthe District is improving or declining.
The Statements of Activities report the operating results ofthe District as a whole, presenting all revenues and expenses ofthe District as well as the change in net position. The Statements ofActivilies include revenues earned in the current fiscal year that will be received in future years, and expenses incurred for the current year that will be paid in future years (i.e. revenue for uncollected taxes and expenses for accumulated, but unused, compensated absences). Revenues are segregated as general revenues and program revenues. General revenues include taxes, interest on investments, and all other revenues not classified as program revenues. Program revenues include charges for services (i.e. user charges, land rentals, fees, forfeitures, and penalties) and capital giants. Depreciation for depreciable capital assets is recorded as an expense in this statement.
Fund financial statements. The District uses fund accounting to demonstrate compliance with finance-related legal requirements. For this purpose, a fund is a grouping of related accounts used to maintain control over resources segregated for specific activities or objectives.
The fund financial statements include infonnation segregated between the District's governmental funds and its fiduciary funds. The governmental funds are used to account for the day-to-day activities of the District, while the fiduciary funds account for employee pensions (Pension Trust Fund) and other post-employment benefits (OPEB Trust Fund). The Governmental Funds Balance Sheets and Statements ofGovemmental Fund Revenues, Expenditures and Changes in Fund Balances focus the reader's attention on the short-term financial position and results of operations, respectively, using the modified accrual basis of accounting. They also include budgetary statements for the General Corporate Fund and the Retirement Fund that compares the original and final budget amounts to actual results. This statement is provided to demonstrate compliance with the budget.
The Statements of Fiduciary Net Position and Statements of Changes in Fiduciary Net Position report the net position available for future pension and OPEB benefits and the change in net position, respectively. The fiduciary financial statements utilize the accrual basis of accounting, similar to that used for the government-wide financial statements.
Reconciliation of governmental fund financial statements to government-wide financial statements. Because the short-term focus of governmental fund financial statements is narrower than the long-term government-wide financial statement focus, reconciliations are required to explain the differences between the fund and government-wide financial statements. As a special purpose government, the District has elected to present the reconciliation by combining the presentation of the governmental fund statements with the government-wide statements. The Governmental Funds Balance Sheets are reconciled to the Statements of Net Position in a combined financial statement presentation (Exhibit A-O. Likewise, the Statements of Governmental Fund Revenues, Expenditures, and Changes in Fund Balances are reconciled to the Statements of Activities in a combined financial statement presentation (Exhibit A-2).
Notes to the basic financial statements. The basic financial statements include notes that provide additional disclosure to better explain the financial data provided in the basic financial statements.
KEY FINANCIAL COMPARISONS
Property taxes. The primary source of revenue for the District is ad valorem property taxes. All District funds, with the exception ofthe District's Capital Improvements Bond Fund, derive their revenues primarily from property taxes. In 2017, total tax revenues increased by SI 1,349.000 in the District's Statement of Activities, as shown on page 39. The property lax levies for the Corporate Fund was the only levy that decreased from prior year; however, the majority ofthe increase m property taxes recorded is due to the change in deferral of tax revenue affecting the ti mi ng of col lections.
Program revenue. T he other notable changes were in user charge revenue and land rentals. T he user charge revenue increase of $2,477,000, as shown on page 39. was primarily due to a new significant industrial user paying both 2016
36 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
and 2017 user charges in 2017. User charge rales and remaining customers have not varied significantly from the prior year. The decrease of S2,814,000 in land rental revenue is due to a change in the rental revenue recognition policy in the current year where the District will defer all rental revenue based on current year payments if they cover the rental period for any time period subsequent to year end. The prior policy was to defer payments only for payments in the last 60 days of the year.
Construction costs. The decrease in construction costs of S50,668,000, shown on page 39, was due to fewer projects being classified as substantially complete in 2017. To be compliant with GASF3 34 reporting, the expense is reduced and the asset is increased when construction projects are capitalized. Thornton Reservoir was substantially complete in 2016. Although large construction projects continued throughout 2017, fewer were completed, thereby decreasing the construction costs for the current year.
Pension costs. The 2017 pension cost decreased $1,792,000 from 2016, as seen on page 39. The decrease can be attributed to changes in the pension expense due to GASB 68 additions and reductions to pension expense. Pension expense is made up of a variety of items including employee service cost, interest, benefit payments, administrative expenses and differences between expected and actual experiences. Employee contributions and net investment income of the fund offset some of these annual expenses.
Claims and judgments. The $5,886,000 increase on the Statement of Activities claims and judgments expense on page 39 is partly due to an increase in claims paid from the governmental funds of $2,119,000. The remainder ofthe expense is a result of the change in the claims liability.
Employee costs. The District's employee-related expenditures are the largest single cost of the General Corporate Fund, comprising 67.1% ofthe total outlays for 2017. Employee costs comprise regular pay, overtime, and health care benefits. The increase in employee costs of $2,166,845, shown on page 41, was attributable to an increase in salary and wages for existing employees and several budgeted positions being filled in 2017.
Energy costs. In 2017, energy costs in the General Corporate Fund showed an increase of $1,037,000 as seen on page 41. Energy costs are made up of electricity and natural gas. Both expenses increased in 2017. Natural gas increased approximately $533,000 as a result of a higher unit cost related to weather fluctuation, and an overall decrease in digester gas production at the Calumet Water Reclamation Plant. The remainder of the increase in energy cost was due to an increase in electricity use from increased aeration blower run time, which is part ofthe sewage treatment process, and resulting expenses.
FINANCIAL SECTION 37
Management's Discussion and Analysis (MD&A) - Unaudited
Year ended December 31, 2017
ANALYSIS OF GOVERNMENT-WIDE FINANCIAL STATEMENTS
A condensed comparison ofthe Statements of Net Position for December 31,2017 and 2016, is presented in the following schedule (in thousands of dollars):
Assets:
Current and other assets Capital assets Total assets Deferred Outflows of Resources: Loss on prior debt refunding Defended amounts related to pension Total deferred outflows of resources Liabilities:
Current liabilities Long-term liabilities Total liabilities Deferred Inflows of Resources:
Deferred inflows for other pension Total deferred inflows of resources Net Position:
Net investment in capital assets Restricted
Unrestricted (Deficit) Total net position
2016
S 1,419,531 7,426,934 8,846,465
5,426 187,959
2017
S 1,405.592 7,594,442 9,000,034~
4.899 182.036 186.935
363.413 4,192,025 4,555,438
193,385
320,758 4,179,147 4,499,905
15,102 — _
15,102~ —"
i
4,710.123 4.591,899
700.839 735,309
(794.533) (787,263)
$ 4,616,429 S 4,539,945
Increase (Decrease)
S (13,939) 167,508 153,569
(527) (5,923) (6,450)
42,655 12.878
55.533
15,102
15,102
118.224 (34,470) (7,270)
76.484
Percent Increase (Decrease)
(1.0)% 2.3 1.7
(9.7) (3.2) (3.3)
13.3 0.3 1.2
100.0
2.6 (4.7) 0.9 1.7 %
The above schedule reports that the District's net position totaled $4,616,429,000 at December 31, 2017, which represents the amount the District's assets and deferred outflows exceeded its liabilities. The largest portion ofthe net position, $4,710,123,000, represents the District's capital assets used to provide services to taxpayers, net ofthe related debt. These assets include land, buildings, equipment, and infrastructure, and they are not available for the District's future spending needs. Restricted net assets totaled $700,839,000 and represent resources that are subject to external or legal restrictions as to how they may be spent, such as federal grants or state loans, capital bond proceeds, tax levies for working cash, and debt service. The remaining portion ofthe unrestricted net position is a deficit of $794,533,000.
38 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
A comparison ofthe changes in net position resulting from the District's operations for the years ended December 3 1, 2017 and 2016 is presented in the following schedule (in thousands of dollars):
Revenues
General Revenues:
Taxes
Interest
Other Program Revenues:
User charges
Land rentals
Fees, forfeits, and penalties Capital grants Total revenues Expenses
Board of commissioners
General Administration
Monitoring and Research
Procurement and Materials Management
Human Resources
Information Technology
Law
Finance
Engineering
Maintenance and Operations
Pension costs
OPEB Trust Fund costs
Claims and judgments
Construction costs
Loss on disposal of capital assets
Unallocated depreciation
Interest
Total expenses / Increase in net position
Total net position, beginning of year Total net position, end of year
2016
595,609 6,181 16,174
48,621 20,166 4,164 12,825
2017
S 606,958 S 8,784 15,752
16,163
51,098 17,352 5,401 14,558
719,903
4,094 15,791 29,591 5,947 54,267 12,734 5,830 3,520 27,830 178,994 106,814 (6,681) (2,662) 85,535 202 12,063 109,550
703,740
4,166 15,690 28,753 6,602 54,447 14.702 6,709 3,570 28,002 177,829 108,606 (7,008) (8,548) 136,203 13
643,419 76,484
65,745
12,083 111.182 693,001
10,739
10,739
4.529.206
4.539,945
S 4,616,429 S 4,539,945 S 76.484
Percent Increase (Decrease)
1.9% 42.1 (2.6)
5.1 (14.0) 29.7 13.5 2.3
(1.7) 0.6 2.9 (9.9) (0.3) (13.4) (13.1) (1.4) (0.6) 0.7 (1.7) (4.7) (68.9) (37.2) 1,453.8 (0.2) (1.5) (7.2) 612.2
7%
Total revenues increased by S16,163,000 in 2017, or 2.3% from the prior year, and total expenses decreased by $49,582,000 in 2017 or 7.2%. The major reasons for the variances are detailed under "Key Financial Comparisons" on pages 36-37.
FINANCIAL SECTION 39
Management's Discussion and Analysis (MD&A) - Unaudited
Year ended December 31, 2017
The following charts show the major sources of revenue and expenses for the year ended December 31, 2017:
Revenue by Source
: Monitoring and Research 4.6% -~j
Interest 1.2°/
User Charges 7.1% Other 2.9% ¦-,
Human Resources 8.4%
Interest 17.0%
Pension costs 16.6%
r Engineering 4.4%
Other 7.9%
Maintenance and
Operations 27.8%
- Construction costs 13.3%
ANALYSIS OF DISTRICT'S GOVERNMENTAL FUND FINANCIAL STATEMENTS
As previously discussed, the focus ofthe District's governmental funds is on short-term inflows, outflows, and currently available resources. The emphasis in the governmental fund financial statements is on major funds. Each major fund is presented as a separate column in the governmental fund financial statements. For 2017, the District reports four major funds and two non-major funds. The four major governmental funds are the General Corporate Fund, the Retirement Fund, the Capital Improvements Bond Fund, and the Debt Service Fund. T he non-major governmental funds are the Construction Fund and the Stormwater Management Fund.
The District ended the current fiscal year with combined governmental fund balances of $820,495,001, a decrease of $62,968,999 or 7.1% from 2016. A total of $38,967,000 ofthe fund balances represents non-spendable fund balances. Restricted fund balances totaled S687,933.000. assigned fund balances totaled $147,473,000, and the remaining deficit of $53,877,999 was unassigned.
General Corporate Fund
The General Corporate Fund is the principal operating fund ofthe District, ll includes annual property taxes and other revenues, which are used for the payment of general operating expenditures not chargeable to other funds. The General Corporate Fund's fund balance at the end ofthe current fiscal year totaled $291,943,001. The fund balance represented 84.9% ofthe General Corporate Fund expenditures, a good indication ofthe fund's liquidity. The total fund balance for the General Corporate Fund had a decrease of .$8,048,000 from 2016. The District's General Corporate Fund consists ofthe Corporate, Corporate Working Cash, and Reserve Claim Divisions, which are presented and explained in Note 1 b on pages 64-70.
T he General Corporate Fund ended the year with an unassigned fund balance deficit of $53,798,999 due to the required reserve claims restriction, non-spendable inventories and restricted working cash.
Metropolitan Water Reclamation District of Greater Chicago
A detailed comparison of the General Corporate Fund revenues for the years ended December 31, 2017 and 2016 is shown in the following schedule (in thousands of dollars'):
General Corporate Fund Comparative Revenue Schedule
Revenues:
Property taxes
Personal property replacement tax
Total tax revenue Interest on investments Land sales
Tax increment financing distributions Claims and damage settlements Miscellaneous User charges Land rentals
Fees, forfeits, and penalties Total revenues
2017
Amount
$ 212,679 28,715 241,394 3,006 50 9,100 199 3,888 51,098 17,352 3,915 $ 330,002
% of Total
64.4% 8.7
73.1 0.9
2.7 0.1 1.2 15.5 5.3 1.2
loo.o';.
2016
Amount
S 243,847 23,436 267,283 1,872 1,233 9,228 187 3.275 48,621 20,166 3,418 S 355.283
% of Total
68.6% 6.6
(31,168) 5,279 (25,889) 1,134 (1,183) (128) 12 613 2,477 (2,814) 497
Percent Increase Increase (Decrease) (Decrease)
(12.8)%
75.2 0.5 0.3 2.6 0.1 0.9
13.7 5.7 1.0
22.5
(9.7)
60.6 (95.9)
(1.4) 6.4
18.7 5.1 (14.0)
14.5 (15.6)%
100.0% S (25,281)
Revenues for the General Corporate Fund come from various major sources: property taxes, replacement taxes, user charges, interest on investments, rental income and tax increment financing distributions. In 2017, General Corporate Fund revenues totaled S330,002,000, a decrease of $25,281,000, or 15.6%, from 2016. The major variances in revenues are explained under "Key Financial Comparisons" on pages 36-37.
A comparative analysis ofthe General Corporate Fund expenditures by object class for the years ended December 31, 2017 and 2016, is shown in the following schedule (in thousands of dollars):
General Corporate Fund Comparative Expenditures Schedule
Expenditures: t Employee Cost Energy Cost Chemicals
Solids & waste disposal Repairs to structures/equipment Materials, pans. & supplies Insurance
Professional services Claims and judgments All other expenditures Total expenditures
2017
Amount
S 230.646 39.173 0,137 13,885 13.164 I 1,152 3,080 4.150 63)05 12.758 S 344.050
% of Total
67.1% 11 4
2.7
4.0
3 8
3 2|10 1010 10|7 100.0%
2016
Amount
S 228,479 38,136 9.756 13.007 15.962 11,372 3.100 5.140 4.786 12.666 S 342,404
% of total
66 7% I 1.1
2.9
3 8
4.7
3.3
0.9
1.5
1.4
3.7
100.0%
Increase (Decrease)
$ 2,167 1.037 (619) 878 (2.798) (220) (20) (990) 2.1 19 92
$ 1.646
Percent Increase (Decrease)
0.9%
2.7 (6.3)
6.8 (17.5) (. 1.91 (0.6) (19.3) 44.3
0.7
0.5%
FINANCIAL SECTION 41
Management's Discussion and Analysis (MD&A) - Unaudited
Year ended December 31, 2017
In 2017, General Corporate Fund expenditures totaled $344,050,000, an increase of SI,646,000, or 0.5%, from 2016. Employee costs, energy costs, and solids and waste disposal were the three largest expenditure components ofthe General Corporate Fund in 2017, accounting for 82.5% of total expenditures versus 81.6% in 2016. The major variances in expenses are explained under "Key Financial Comparisons" on pages 36-37.
Other Major Funds. The District's Debt Service Fund accounts for property tax revenues and interest earnings used for the payment of principal and interest on bonded debt. The Debt Service Fund's fund balance at the end of the current fiscal year totaled $147,000,000. The fund balance represented 64.2% of the total Debt Service Fund expenditures. The fund balance for the Debt Service Fund decreased by $ 16,508,000 in the current year, as a result of the decrease in property tax revenue and a slight increase in bond principal and interest payments.
The Capital Improvements Bond Fund is a capital projects fund used by the District for the construction and preservation of capital facilities. The Capital Improvements Bond Fund's resources are bond proceeds, government grants, and state revolving fund loans. The fund balance in the Capital Improvements Bond Fund at the end ofthe current fiscal year totaled $311,997,000. This amount will provide resources for the 2018 capital construction program. The fund balance represented 127.3% ofthe fund's expenditures. The fund balance decrease of $62,038,000 in the current year was primarily due to continued construction of capital projects and no issuance of general obligation bonds in 2017.
The Retirement Fund is classified as a major fund because total liabilities in prior years have been greater than 10% ofthe total governmental funds and the fund is used for collection ofthe tax levy which is remitted to the Pension Board. This presentation remains for comparative purposes. There is no fund balance for the Retirement Fund at the end ofthe current fiscal year, as all funds are transferred, or due to, the District's Pension Fund.
GENERAL CORPORATE FUND BUDGEJ ANALYSIS
The General Coiporatc Fund budget includes the budgetary accounts ofthe Corporate Fund and Reserve Claim divisions. A comparison ofthe 2017 original budget to the final amended budget and actual results for the General Corporate Fund is presented in the basic financial statements (Exhibit A-3). A comparison of the General Corporate Fund's 2017 budget and actual results at the appropriation line item level is presented in Combining and Individual Fund Statements and Schedules (Exhibit C-l).
42 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
A condensed summary ofthe 2017 General Corporate Fund budget and actual amounts is presented in the following schedule (in thousands of dollars):
Actual Positive Amounts (Negative)
Actual Variance with Final
Budget Original Final
Revenues:
Property and personal properly replacement taxes
Adjustment for working cash borrowing
Adjustment for estimated tax collections
Tax revenue available for current operations
User charges
Interest on investments
Tax increment financing distributions
Land rentals
Land sales
Claims and damage settlements Other
Equity transfer Total revenues
$ 239,899 $ 239,899 (4,272) (4,272)
235,627 235,627
47,000 47,000
800 800
11,025 11,025
19,000 19,000
8,467 8,467
6,000 6.000
327,919 327,919
$ 239,885 S (14)
(4.272) —
11,653 11,653
247,266 11,639
53,252 6,252
1,823 1,023
12,036 1,011
20,628 1,628
50 50
223 223
8,328 (139)
6.000 --_
349,606 21,687
Operating expenditures:
Board of Commissioners 4.496 4,496 4.073 423
General Administration 17,387 17,387 15,729 1,658
Monitoring and Research 31,270 31,270 29,090 2,180
Procurement and Materials Management 9,567 9,567 8,726 841
Human Resources 60.905' 60,905 54,171 6,733
Information Technology 17.359 17,359 14,557 2,802
Law 8,386 8,386 5,921 2,465
Finance 3,684 3,684 3.528 155
Engineering 28,835 28,835 ,26.061 2,774
Maintenance and Operations 187.035 187.035 176.568 10,469
Claims and judgments 30,617 30,617 6,905 23,712
Total expenditures 399,541 399.541 345.329 54,212"
Revenues over (under) expenditures (71,622) (71,622) 4.277 75,899
Fund balance at beginning of year 160,721 160.721 166.348 5.627
Net assets available for future use (89,099) (89.099) - 89.099
Fund balance at beginning of year 71.622 71.622 . 166.348 94.726
Fund balance at end of ihe year S $ — S 170,625 S 170.625
Actual revenues on a budgetary basis for 2017 in the General Corporate Fund totaled $349,606,000. or $21,687,000 more than budgeted revenues, a 6.6% variance. Properly taxes and personal property replacement taxes were $ 11,639,000 more than the budget, mostly due to the collection of taxes greater than the allowance. User charge receipts were $6,252,000 more than budgeted due to an additional $5.6 million dollar unbudgeted payment from a new significant industrial user paying both 2016 and 201 7 user charges in 201 7. Interest on investments was $ 1.023.000 over budget as of result of a switch to collateralized short term certificates ol deposit because of an increase m the Federal fund
FINANCIAL SECTION 43
Management's Discussion and Analysis (MD&A) - Unaudited
Year ended December 31, 2017
rate. Land rentals were SI ,628,000 more than the budget due to a continued effort to maximize the District's real estate portfolio. i
The 2017 General Corporate Fund final appropriation of 5399,541,000 remained equal to the original amount. Actual budgetary expenditures totaled $345,329,000, or 85.8%. of the total appropriation. The $54,212,000 excess of appropriations over actual expenditures was primarily due to claims and judgments costs being $23,712,000 less than appropriations, and positive variances in expenditures from all departments, most noticeably a 510,469,000 positive variance for Maintenance and Operations. Expenditures for the Maintenance and Operations Department were below appropriations, for reasons that include position vacancies throughout the year, lower than estimated use of chemicals due to refining the processes in phosphorous removal at Stickney, disin lection at Calumet, as well as lower than estimated distribution of biosolids to privately owned agricultural land.
The District's Reserve Claim fund actual payments were significantly lower than budgeted, resulting in a large variance between budget and actual, as it is the policy ofthe District to appropriate the entire Reserve Claim fund balance. This is consistent with the Board of Commissioners' policy to accumulate sufficient reserves for payment of future claims without exposing the District to financial risk that could curtail normal operations.
CAPITAL ASSETS AND MODIFIED APPROACH
Capital Assets. The District's reportable capital assets, net of accumulated depreciation, as of December 31, 2017, amounted to $7,594,442,000. Reportable capital assets, net of accumulated depreciation, for 2017 as compared to 2016 are as follows (in thousands of dollars):
Percent
Increase Increase
2017 2016 (Decrease) (Decrease)
Land S 144,204 S 142,880 S 1,324 0.9%
Permanent easements 1,463 1.463 — —
Buildings 6,984 7,169 (185) (2.6)
Machinery and equipment 24,180 25,239 (1,059) (4.2)
Computer software 1,449 857 592 69.1
Depreciable infrastructure 1,651,454 ' 1,662,767 (11,313) (0.7)
Modified infrastructure 5,085,766 5.045,360 40,406 0.8
Construction in progress 67S.942 541,199 137,743 25.5
Total S 7,594,442 S 7,426,934 1 167,508 2.3%
i
Significant capital asset changes during the current fiscal year included the following:
Total capital asset additions exceeded retirements and depreciation by 5167.508.000 in 201 7.
Construction in progress increased by $137,743,000 from 2016 ro 2017 because several large projects continued through 2017 but were not completed, and therefore not moved to infrastructure. Major projects which remained in progress during 2017 include: additional construction related to Phase II ofthe McCook reservoir and surrounding tunnels, construction of primary settling tanks with an aerated grit facility, construction of the Addison Creek reservoir, continued construction of Stickncy's Phosphorous Recovery system, and construction of Calumet TARP screens.
Increase in the Modified Infrastructure is primarily due to the substantial completion ofthe distributed control system for solids processing at Stickney WRP, Mainstream Pumping Station and other remote stations. Completion of this project accounted for approximately $35 million of the increase to Infrastructure. T he remainder ofthe increase is due to the residual costs of construction projects completed in the prior year being added directlv to infrastructure.
44 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
In addition to the above, commitments totaling 5290.252,000 remain outstanding for ongoing construction projects. Additional disclosure on construction commitments can be found in Note 9 to the basic financial statements.
Modified approach. The District's infrastructure assets include interceptor sewers, wastewater treatment basins, waterway assets (such as reservoirs and aeration stations) and deep tunnels, drop shafts and regulating elements making up a pollution and flood control program called TARP. The District is using the modified approach to report its infrastructure assets, with the exception ofthe TARP deep tunnels and drop shafts, which arc depreciated. The District elected the modified approach to: a) clearly convey to the taxpayers the District's efforts to maintain infrastructure assets at or above an established condition level; b) provide and codify a process to coordinate construction projects between the Engineering and Maintenance and Operations departments; c) readily highlight infrastructure assets that need significant repair/rehabilitation/replacement under a construction project; and d) provide additional evaluative information to bond rating agencies to insure that the District's bond rating is maintained at the highest level.
The Kirie, Hanover, Egan, Central (Stickney), O'Brien, Calumet, Lemont, and Waterways network assets had their initial condition assessments completed between 2002 and 2006. Kirie, Central (Stickney) and Waterways each had its most recent condition assessment completed in 2017. The Egan and O'Brien networks each had its most recent condition assessment completed in 2016. The Hanover, Calumet and Lemont networks each had its most recent condition assessment completed in 2015. (See further discussion ofthe modified approach in the Required Supplementary Information Section). '
As noted in the Required Supplementary Information, the condition ratings for eligible infrastructure assets compare favorably with the District's target level of acceptable or bettor. In addition, there arc no significant differences between the estimated maintenance and preservation costs and the actual costs. Additional disclosure on the District's capital assets and modified approach can be found in the Notes 1.1. and 6 lo the basic financial statements and in the Required Supplementary Information section.
DEBT ACTIVITY
Long-term Debt. The District's long-term liabilities as of December 3 1,2017, totaled 54,359,376,000. The breakdown of this debt and changes from 2016 to 2017 are as follows (in thousands of dollars):
Percent
Increase Increase
2017 2016 (Decrease) (Decrease)
Bondspayablc.net S 2.879,915 S 2,965.282 S (85,367) (2.9)%
Bond anticipation notes 296.529 157.390 139,139 88.4
Claims payable 30,669 40.236 (9,567) (23.8)
Compensated absences 22,811 24.486 (1,675) (6.8)
Capital lease 38,574 41.047 (2,473) (6.0)
Net Pension liability 1,079,566 1,073.113 6,453 0.6
Net OPEB obligation 11.312 17.993 (6,681) (37 1)
Total $ 4,359,376 S 4.319,547 S 39,829 0.9 %
Significant changes in long-term liabilities during the current fiscal year included the following:
Bonds payable, net. decreased by 585,367,000 in 2017 as a result of payments on existing bonds with no additional issuances in the current year.
Bond anticipation notes increased by 5139,139,000 in 2017 as a result ofthe issuance of 5228,781,000 in notes and the conversion of $39.281.000 from bond anticipation notes to bonds plus an approximate $50 million chaime in interest accrued. .
FINANCIAL SECTION 45
Management's Discussion and Analysis (MD&A) - Unaudited
Year ended December 31, 2017
Claims payable decreased by $9,567,000 due to reductions in workers' compensation, general, health and dental, and environmental remediation claims.
A number of items factor into the Net Pension Liability. The $6,453,000 increase is the net change of increases in interest, service cost, administrative costs, and expected v. actual experience with decreases in contributions and net investment income. See Note 7 for additional details.
The District's general obligation bonds have the following long-term credit ratings: Standard & Poor's Financial Services. LLC AA+ Fitch, Inc. AAA Moody's Investors Service Aa2
In July 2015, Moody's Investor Service downgraded the District's bond rating from Aal to Aa2. In May 2016, Standard & Poor's Financial Services downgraded the District's bond rating from AAA to AA+. The primary reason for the downgrades is the pressure on the District's tax base due to the significant debt burden and pension liabilities for major governmental agencies in Cook County, reflecting the opinion on the affordability of possible tax increases by other agencies and how this could impact Cook County residents. Additional disclosure on debt can be found in Note 11 to the basicfinancial statements.
Debt Limits and Borrowing Authority. Various applicable sections ofthe Illinois Compiled Statutes establish the following limitations relative to the District's debt:
Effective October 1, 1997, the District may fund up to 100% ofthe aggregate total ofthe estimated amount of taxes levied or to be levied for corporate purposes, plus the General Corporate Fund portion of the personal property replacement tax, through borrowing from the Corporate Working Cash Fund and issuance of tax anticipation notes or warrants. The policy of the District currently is to fund up to 95%. The provisions also pertain to the Construction, Construction Working Cash, Stormwater Management, and Stormwater Working Cash Funds.
The amount ofthe District's debt may not exceed 5.75% ofthe last published equalized assessed valuation of taxable real estate within the District, which was SI40,752,201,000 for the 2016 property tax levy. At December 31, 2017, the District's statutory debt limit of $8,093,25 1,000 exceeded the applicable net debt amount of $2,963,366,188 by $5,129,884,812.
The Illinois Compiled Statutes provide authorization for the funding ofthe District Capital Improvement Program by the issuance of non-referendum capital improvement bonds. Starting in 2003, bonds may be issued during any budget year in an amount not to exceed $150 million plus the amount of any bonds authorized and unissued during the three preceding budget years. The District has issued various series of bonds since the authorization. This limitation is not applicable to refunding bonds, money received from the Water Pollution Control Revolving Fund, and obligations issued as part ofthe American Recovery and Reinvestment Act of 2009, issued prior to January I, 2011, commonly known as "Build America Bonds". Bonds authorized, unissued and carried forward were $450,000,000 for the budget year ended December 31, 201 7.
The District has non-referendum bonding authority until the year 2024. When the Property Tax Extension Limitation Law was made applicable to Cook County, the legislature recognized that the completion ofthe Tunnel and Reservoir Plan (TARP) was such a high priority that it exempted TARP bonds from tax cap limits. In 2010, the Local Government Debt Reform Act was amended. The District's debt service extension base for the levy year 2017 is S166,066,470 (the "Debt Service Extension Base"), which can be increased each year by the lesser of 5% or the percentage increase in the Consumer Price Index (as defined in the Limitation Law). Tho Property Tax Extension Limitation Law has been amended so that the issuance of bonds by the District to construct TARP will not reduce the District's ability to issue limited bonds for other major capital projects. The amount of outstanding non-referendum Capital Improvement Bonds may not exceed .3.35% of the last known equalized assessed valuation of taxable property within the District. Al
46 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
December 31, 201 7, the District's outstanding capital improvement and refunding bonds (excluding State Revolving Fund bonds and alternate bonds) of $1,812,210,000 did not exceed the limitation of $4,751,198,739.
Outstanding capital improvement and refunding bonds related to the Clean-up and Flood Control Program and the remaining authorization al December 31, 2017, are indicated in the following schedule (in millions of dollars):
Capital Improvement and Refunding Bonds Outstanding and Remaining Authorization
Capital
Year of Issue Total Improvement Refunding
2007 $ 323 $ — S 323
2009 600 600 —
2011 320 320 —
2014 245 174 71
2016 376 54 322_
Total bonds outstanding at December 31,2017 1.864 _S 1,148 S 716
Remaining bond authorization at December 31,2017 2,501
Total bond authorization at December 31,2017 $ 4,365
The amount of non-referendum Corporate Working Cash Fund bonds, when added to (a) proceeds from the sale of Working Cash Fund bonds previously issued, (b) any amounts collected from the Corporate Working Cash Fund levy, and (c) amounts transferred from the Construction Working Cash Fund, may not exceed 90% of the amount produced by multiplying the maximum general corporate tax rate permitted by the last known equalized assessed valuation of all property in the District at the time the bonds are issued, plus 90% of the District's last known entitlement of the Personal Properly Replacement Tax.
Additional information on the District's debt can be found in Note 11 to the basic financial statements and Exhibits I-10 through 1-12 of the Statistical Section.
ECONOMY AND OTHER CONDITIONS IMPACTING THE DISTRICT
The equalized assessed valuation ofthe District has experienced a 0.24% average growth rale over the last ten years although the 2016 equalized assessed valuation of $140,752,201 is 8% higher than the previous year. As in 2016, home sales seem slow, but area home prices continued to climb because there is insufficient inventory to meet the current demand. The median price of homes in the Chicago area was up 5.6% compared to the prior year. A strong fund balance, along with an emphasis on controlling expenditures, should allow the District lo protect its operations from economically sensitive revenues stemming from fiscal constraints at the federal and state levels. T he boundaries of the District encompass 91% ofthe land area of Cook County. The District is located in one ofthe strongest and most economically diverse geographical areas of Illinois. Unemployment for the Chicago-Naperville-Joliet Metropolitan Division decreased to a seasonally adjusted rale of 4.8% for 2017, down from 5.8% a year earlier. Employment, tourism, manufacturing, and the commercial and residential real estate markets have all been steadily improving in the past few years.
Corporate Fund. T he Corporate Fund is the District's general operating fund and includes appropriation requests for all the day-to-day operational costs anticipated for 2018. The total appropriation for the Corporate Fund in 2018 is $370.2 million, an increase of $ 1.3 million, or .3% from the 2017 Adjusted Budget. The 201 8 tax levy for the Corporate Fund is $223.9 million, an increase ol"SI6.5 million or 7.4% compared to the 2017 Adjusted Budget.
FINANCIAL SECTION 47
Management's Discussion and Analysis (MD&A) - Unaudited
Year ended December 31, 2017
Property taxes and user charges are the primary funding sources for the District's Corporate f und. Illinois law limits the tax rate of this fund to 41 cents per $100 of equalized assessed valuation. The estimated tax rate for the Corporate Fund in 2018 is 16.11 cents, an increase of 0.66 cents from 2017 as adjusted. User charges are collected from industrial, commercial, and non-profit organizations to recover operations, maintenance, and replacement costs proportional to their sewage discharges, in excess of properly taxes collected. The major categories of payers: chemical manufacturers, food processors, and government services, are generally expected to maintain their recent level of discharges.
Stormwater Management Fund. The Stormwater Management Fund was established by Public Act 93-1049 on January 1, 2005. This fund accounts for tax levies and other revenue to be used for stormwater management activities throughout all of Cook County, including areas that currently lie outside the District's boundaries. The fund consolidates the stormwater management activities ofthe Engineering and Maintenance & Operations Departments.
The Stormwater Management Fund appropriation for 2018 totals $65.6 million, an increase of SI 9.8 million or 43.2% from the 2017 Adj listed Budget. Property taxes are the primary funding source for the District's Storm water Management Fund. Illinois law limits the tax rate of this fund to 5 cents per $100 of equalized assessed valuation. The estimated tax rate for the Stormwater Management Fund in 2018 is 3.2 cents, which is an increase of 0.4 cents from 2017 as adjusted.
Although the primary funding source for the Fund is the Stormwater Property Tax Levy, the District also issued Alternate Revenue Bonds funded from the Slormwatcr Levy in both the 2015 and 2016 bond offerings. The "green" projects financed by the bonds involves the development, design, planning and construction of regional and local stormwater facilities provided for in the countywidc stormwaler management plan and the acquisition of real property.
By means of this program, the District has completed Detailed Watershed Plans (DWP) for all six watersheds in Cook County, initiated a Stormwater Management Capital Improvement program, initiated a Small Streams Maintenance Program (SSMP), and adopted and implemented the Watershed Management Ordinance.
Two categories have been established for DWP projects. The lirst category is streambank stabilization, which involves addressing critical active streambank erosion threatening public safety, structures, and/or infrastructure. The second category of projects addresses regional overbank flooding. The selected projects constitute the Stormwater Capital Improvement Program, and will be scheduled according to funding availability.
Through the management ofthe SSMP, the M&O Department works to reduce Hooding in urbanized areas. The streams that flow through the neighborhoods of Cook County are more than just a scenic part ofthe landscape but also serve the vital function of draining stormwater and preventing flooding. In order to function, the streams must be maintained, which includes removing blockages and preventing future blockages by removing dead and unhealthy trees and invasive species.
48 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
The District's statutory authority lor Stormwater Management in Cook County (70 ILCS 2605/7h) was amended in 2014 to allow for the acquisition of flood-prone properties. Subsequent to amending the Cook County Stormwater Management Plan to be consistent with Public Act 98-0652, the District's Board of Commissioners adopted a policy on selection and prioritization of projects for acquiring flood-prone property, which is comprised of three distinct components, as follows:
Local Sponsorship Assistance Program: The District's top priority will be to facilitate the Illinois Emergency Management Agency's federally funded program by assisting local sponsor communities in providing their share of the cost for property acquisition;
District Initiated Program: The cost of a property acquisition alternative will be estimated for any approved project and compared to the estimated cost of the structural project determined through a preliminary engineering analysis. Should the cost of the property acquisition alternative be less than the structural project, and the benefits at least equivalent, the acquisition alternative will be pursued in lieu ofthe structural project;
Local Government Application Program: The District will consider applications directly from local governments requesting property acquisition of specific flood-prone structures.
Capital Improvement Program: Construction Fund and Capital Improvements Bond Fund. The District's overall Capital Program includes 2018 project awards, land acquisition, support, future projects, and projects under construction, with a total cost of approximately $1.2 billion. Capital projects involve the acquisition, improvement, replacement, remodeling, completing, altering, constructing, and enlarging of District facilities. Included are all fixtures which are permanently attached to and made a part of such structures and non-structural improvements, and which cannot be removed without, in some way, impairing the facility or structure.
Projects under construction have been presented and authorized in previous Budgets and are recognized in the Annual Budget as both outstanding liabilities in the Capital Improvements Bond Fund, and as re-appropriations in the Construction Fund. Future projects, not yet appropriated, are included in the Annual Budget to present a comprehensive picture of the District's Capital program. These future projects will be requested for appropriation subject to their priority, design, and available funding.
The District utilizes two funds for its Capital program, the Construction Fund and the Capital Improvements Bond Fund. The Construction Fund is utilized as a "pay as you go" capital rehabilitation and modernization program. Capital projects are financed by a tax levy sufficient to pay for project costs as they are constructed. As the District replaces, rehabilitates, and modernizes aged and less effective infrastructure, capital projects are assigned to the Corporate, Construction, or Capital Improvements Bond Fund based on the nature ofthe project, dollar magnitude, and useful life of the improvement. The Construction Fund is used for operations-related projects, where the useful life of the improvement is less than 20 years.
The Capital Improvements Bond Fund, the District's other capital fund, includes major capital infrastructure projects whose useful lives extend beyond 20 years, and which will be financed by long-term debt. Federal and State grants, and State Revolving Fund loans.
The 1995 Tax Extension Limitation Law (Tax Cap), and subsequent amendments lo the bill, dramatically impacted the methods of financing the Capital Improvements Bond Fund. The original legislation required, in general, that all new debt be approved by referendum. However, an exemption for projects initiated before October 1, 1991 was granted to the District to enable completion ofthe Tunnel and Reservoir Plan (TARP).- The bill was later amended lo establish a "debt extension base," which allowed local governments, with non-refcrendum authority, to continue to issue non-referendum debt in terms of "limited bonds'' as long as their annual debt service levies did not exceed 1994 levels. This law was further amended in 1997 to exclude TARP project debt from this debt service extension base. The passage of legislation in 1997 allowing for expanded authority to issue "limited bonds" by excluding pre-existing TARP projects provides additional financing flexibility to proceed with our Capital program.
FINANCIAL SECTION 49
Management's Discussion and Analysis (MD&A) - Unaudited
Year ended December 31, 2017
The USEPA implemented the State Revolving Fund (SRF) to ensure that each state's program is designed and operated to continue to provide capital funding assistance for water pollution control activities in perpetuity, but preserves a high degree of flexibility for operating revolving funds in accordance with each state's unique needs and circumstances. Funds in the SRF are not used to provide grants, but must be available to provide loans for the construction of publicly owned wastewater treatment works. Low interest SRF loans arc an integral part ofthe District's capital improvements financing. SRF revenues are based on the award and construction schedule of specific projects. In 2017, the District received $228,781,500 in cash receipts for SRF projects.
Construction Fund. The Construction fund appropriation for 2018 totals $26,080,600, a decrease of $8,369,800 or 24.3% from the 2017 Adjusted Budget.
Capital projects in the Construction Fund arc primarily supported by property taxes and thus subject to the Tax Cap. The 2018 tax levy planned for the Construction Fund is $11.700,000. a decrease of S4.6 million or 28.1% from the 2017 Adjusted Levy.
Capital Improvements Bond Fund. The 2018 appropriation for the Capital Improvements Bond Fund is $312,982,900, a decrease of $41,642,700 or 11.7% from the 2017 Adjusted Budget. Capital projects pursued by the District are: mission critical, improve environmental quality, preservation/rehabilitation of existing infrastructure or commitment to the community through process optimization. The appropriation is based on the scheduled award of $275,206,000 in projects. Capital Improvements Bond Fund projects scheduled for award in 2018 with estimated award values include one TARP modification project of $2.5 million; eleven plant expansion and improvement projects at $38.6 million; and fourteen facilities replacement projects at $89.1 million.
The decrease in appropriation for the Capital Improvements Bond Fund of $41,642,700 reflects the pattern in the award of major projects. An appropriation for the open value of existing contracts is also carried forward from the prior year.
The remaining $37,776,900 million appropriation fortius fund will provide for studies, services, and supplies to support District design and administration of proposed and ongoing construction activity, including the TARP reservoirs. A comprehensive narrative, and exhibits detailing our entire Capital program, is provided in the Capital Budget (Section V) ofthe 2018 budget document.
A listing and description of proposed projects, and projects under construction, scheduled for 2018, can be found in the Capital Budget.(Scction V) ofthe 2018 Budget document.
Other Post-Employment Benefits (OPEB) Trust. The District provides subsidized health care benefits for its retirees. The Governmental Accounting Standards Board (GASB) Pronouncement 45 requires reporting ofthe future liability for maintaining these benefits in the Comprehensive Annual Financial Report (CAFR).
In 2006, the District proposed state legislation to give authority to establish an OPEB trust. Public Act 95-394 became effective on August 23, 2007. Since inception, the District has budgeted and transferred a total of $ 127,400,000 million into the OPEB Trust Fund. The District has continued to contribute $5.0 million per year until the T rust is fully funded. Total net position was $195,200,000 as of December 31, 2017. The accumulated unfunded OPEB obligation was estimated at approximately S113,547,457 at December 3 1.201 7. On December 19. 2013, the Board of Commissioners adopted a revised investment policy statement for the Metropolitan Water Reclamation District Retiree Health Care Trust.
50 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
In 2007, the Board adopted an initial advance funding policy meant to (i) improve the District's financial position by reducing the amount of future contributions and (ii) serve to establish a reserve to help ensure the financial ability to provide healthcare coverage for District retirees and annuitants in the future. On October 2, 2014, the advance funding policy was amended by the Board with the following guidelines:
Target Funding Level: 100% maximum
Funding Period: 12 years
Funding Amount: $5 million funding in each of the twelve years 2015 through 2026, with no further advance funding contribution required after 2026
Beginning in 2027, cash to be withdrawn from the Trust to fund claims and insurance premiums will be determined by the Trust's actuary with the target funding level to be maintained at 100% for all future years. There is currently no legal requirement for the District to partially or fully fund the OPEB Trust Fund and any funding is on a voluntary basis.
The policy adopted by the District is cautious by design, and will provide ample opportunity for ad justment as experience is gained. Future direction may also be changed significantly by national health care policies and programs.
Pension and OPEB Reporting Changes. The District implemented GASB 68, Accounting and Financial Reporting for Pensions, beginning with the year ended December 3 I, 2015. The implementation of this standard resulted in a net pension liability recognized by the District of S947,300,000; however, net position remained positive. The OPEB Trust Fund implemented GASB 74 (for post-retirement plan) in 201 7 and the District will be implementing GASB 75 (for employer) in 2018.
Organized Labor. The District has seven collective bargaining agreements that cover sixteen unions and include approximately 770 ofthe District's employees for the purposes of establishing wages and benefits. Three-year successor agreements were negotiated with all bargaining units in 2017 and will expire in 2020.
Retirement Fund. On August 3, 2012, Governor Quinn signed House Bill 4513, now Public Act 97-0894, into law. The tax multiple, which is limited by state statute, was increased in 2013 from 2.19 lo the amount sufficient lo meet the Fund's actuarially determined contribution requirement, but not to exceed an amount equal to 4.19 times the employee contributions two years prior. The employee contributions for tier I employees (those hired before January 1. 2011) increased 1% each year for 3 years beginning January 1, 2013, increasing the contribution rate from 9% to 12%. The employee contributions will remain at 12% until the funded ratio reaches 90% then the contribution rate will be reduced to 9%.
REQUESTS FOR ADDITIONAL INFORMATION
This financial report is intended to provide a general summary ofthe District's finances to interested parties, and to demonstrate the District's accountability over the resources it receives. Please feci free to contact the Clerk/Director of Finance or Comptroller at the Metropolitan Water Reclamation District of Greater Chicago, 100 E. Erie Street, Chicago, Illinois 60611-2803, (312) 751-6500. if additional information is needed.
FINANCIAL SECTION 51
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BASIC FINANCIAL STATEMENTS
Exhibit A-1
Governmental Funds Balance Sheets/Statements of Net Position
December 31. 2017
(with comparative amounts for prior year)
(in lliousands ofiiollars)
Assets and deferred outflows of resources
Assets Cash
Certificates of deposit Investments (note 4) Prepaid insurance Taxes receivable, net (note 5) Other receivables, net (note 5) Due from other funds (note 12) Restricted deposits Inventories
Capital assets not being depreciated/amortized (note 6)
Capital assets being depreciated/amortized, net (note 6) Total assets Referred outflows of resources:
Loss on prior debt refunding
Deferred outflows for pension related amounts
Total deferred outflows of resources
Total assets and deferred outflows of resources
Liabilities, deferred inflows of resources, and fund balances/net position
Liabilities:
Accounts payable and other liabilities (note 5)
Due to Pension Trust Fund (note 12)
Due to other funds (note 12)
Accrued interest payable
Unearned Revenue (note 5)
Long-term liabilities: (note 11)
Due within one year
Due in more than one year Total liabilities Deferred inflows of resources:
Unavailable tax revenue (note 5) Other unavailable revenue (note 5) Deferred inflows for other pension amounts Total deferred inflows of resources Fund balances' Nonspendable:
Prepaid insurance
Inventories Restricted for.
Deposits
Working cash
Reserve claims
Debt service
Capital protects
Construction Assigned
Unassigned (Deficit) Total fund balances
'total liabilities, deferred inflows, and fund balances Net position.
Net investment in capital assets Restuctcd for corporate working cash Restricted for reserve claim Restricted for debt service Restricted for capital proiects Restricted for construciion working cash Restricted for stormwater working cash . Unrestricted (Deficit)
Total net position See accompanying notes lo the basic financial statements
Capital Improvement Bond Funds
General Corporate Fund
2016
2017
2017
2017
2016
Debt Service Fund
7,514 82,187 233,557
11.145 10.051 88,768
224,578
19,388 S 65.675 146.736 2.1 17 223,793 14,294 . 101 285 35.502
21.162 116.881 "9,282 4,101 221,802 8,599 101 527 34,787
21)16
3.478 S 14.113 S 20.009 56,219 92,185 255,468
97.261
219,040
507.891
368.297
507,242
334,542
334.712
42,497
420,519
$ 55,356 S 45,543
S 507,242 $ 507.891 S 334.542 $ 334.712 $ 368.297 S • 420,519
S 21,924 $ 28,126 S
55,356
45,543
32,981
8,139 4,855
174,919
185,236
187,542
30,063
941
944
944
941
174.919
187,542
171.204
171.204
2,1 17 35.502
285 279.390 27.125
185,236
4,101 34,787
163.508
527 280.437 25,890
164.524
147.000
— 147.473
28,694
145.341
163.508
3 I 1.997
374.035
153.799) (44.428) —_
291.943 299.991 147.000
S 507.242 S 507.891 S 334.542 S 334.712 S 368.297 S 420.519
54 FINANCIAL SECTION
Metropolitan Water Reclamation District oj Greater Chicago
Retirement Other Governmental / Total Governmental Adjustments Statements ol'
Fund Nonmaior Funds Funds (Nole 2a) Net Position
2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
2,590 29,069 32,958 79 55,128 746
120.570
5.081 5.003 31.360 1
45.865
87.310
172.874 503,838 2,118 557,898 111,555 101 285 35,502
49,010 $ 35,461 S
212.220 476.476 4.180 576.550 51.842 101 527 34,787
1,419.632
(101)
5,910.375 1,684,067 7,594.341
(101)
5,730,902 1,696,032 7,426,833
49,010 % 212,220 '' 476,476 4,180 576,550
51.842
527 34.787 5,910.375 1,684.067
9,000,034
35.461 172.874 503,838 2.118 557.898 111.555
285 35.502 5,730,902 1,696,032
8,846,465
4,899 182,036 186.935
5.426 187.959
193.385
4,899 182.036 186,935
5,426 187,959 193,385
75,042 $ 69,200 $ 120,570 S 87.310 $ 1,405.693 S 1.419,632 S 7,781.276 $ 7,620.218 S 9,186.969 S 9,039,850
4,886 101
5,430 $ 82,166 S 79,099
— 15.868 20.051
101 101 101
4.S55
S.139
— $ — S 82.166 S 79,099
73.990 60,208 89.858 80,259
(101) (101) — —
15,899 16,145 15,899 16,145
— — S.139 4,855
167,351 4.192.025 4,449.164
140.400 4.179,147 4.395,799
167.351 4,192,025 4,555,438
140,400 4,179,147 4,499,905
477.980 944
478.924
431.121 941
432.062
(477.980) (944) 15.102 (463.822)
(431.121) (941)
(432.062)
4,180 34.787
2.118 35.502
(4.180) (34.787)
(2,118) (35,502)
59.454
59.713
527 340.150 25,890 147,000 168,670 5,696 147,473 (53,878)
4.146 5,696
285 338.844 27,125 163.508 228,694
(79)
(13.525)
69,555
45.930
820.495
145.341 (57.953)
883,464
69,200 S 120.570 S 87.310 S 1.405.693 S 1.419.632
(527) (340.150) (25.890) (147.000) (168.670) (5,696) (147.473) 53.878 (S20.4l>5)
(285) (338,844) (27,125) (163.509) (228.694)
(145.341) 57,954 (883,464)
Net position'
Net investment in capital assets Restncled lor corporate working cash Restricted lor reserve claim Restricted for debt service Restricted for capital projects Restricted for consli'uclion woiking cash Restncled for stormwater woiking ca>h Uniesliieted (Deficit)
lolal net position
4,591,899 270.390 2.128 318.575 75.762 22,070 37.384 (787.263)
4,710,123 280.437 9.976 318.046 32.067 22.204 37.500 (794.533)
4,710.123 28(1.437 9.476 318.646 32.067 22.204 37.509 (794.533)
4,591.899 279.340 2.12S 318.575 75.762 22,070 37.384 (787.263)
S 4.6 16.429 S 4.530.'.;45 S 4.6 16.429 S 4.530.945
FINANCIAL SECTION 55
Exhibit A-2
Statements of Governmental Fund Revenues, Expenditures and Changes in Fund Balances/Statements of Activities
Year ended December 31, 2017
(with comparative amounts for prior year)
(in thousands oj {hilars)
Revenues
General revenues: Property taxes
Personal properly replacement tax Interest on investments Land sales
Tax increment financing distributions Claims and damage settlements Miscellaneous
Gam on sale of capital assets Program revenues:
Charges for services:
User charges
Land rentals
Fees, forfeits, and penalties Capital grants and contributions:
Federal and state grants Total revenues Kxpcnditurcs/Kxpcnses Board of Commissioners General Administration Monitoring and Research Procurement and Materials Management Human Resources Information Technology Law Finance Engineering
Maintenance and Operations
Pension costs
OPLB costs
Claims and judgments Construction costs Loss on disposal of capital assets Depreciation and amortization (unallocated) Debt service.
Redemption of bonds and capital lease
Interest and bond issuance costs
Total expenditures/expenses Revenues over (under) expenditures Other financing sources (uses)
Payment lo escrow agent for refunded bonds
Bond anticipation notes issued
Bond anticipation notes converted
Bond anticipation notes refunded
Refunding bonds issued
General obligalion bonds issued
Premium on bonds issued
Ti ansfers
Total other financing sources (uses)
Revenues and other financing sources (uses) ovci (under) expenditures
Change m net position Fund balances/net position.
Beginning ofthe year
lind oflhe year
Sec accompanying notes lo the basic financiiil statements
General Corporate Fund
Debt Service Fund
2016
2016
2017
2017
2017
Capital Improvement Bond Funds
212,679 28,715 3,006 50 9,100 199 3.888
2016
243.847 S 207,606 $ 235,34] S
3,659
2,6X9
1.433
1.065
574 1,958
22 2,217
23,436 1.872 1,233 9,228 187 3,275
51,098 17,352 3,915
10
12,817
48,621 20.166 3.418
17,745
330.002
355,283
14,555
4.075 15,766 29,696
5,954 54.225 12.728
5.922
3,530 26.068 179.181
209.049 236.410 20.746
4,158 15.490 28.490
6,611 54,606 14,213
6,707
6.905
249,294
3.597 26,051 177,695
4.7X6
100.3 12 115,159 215.471 20,939
240,640
2,473 1,916 245,029
2,358 2,315 253,967
344.050
342.404
(14,048)
12.879
(224.283) (236.222)
I 75.245 39,281 (39.281)
179.224 185.685 (185.685)
104.000 21.004 2.37')
306.607 70.385
11 1.222 I 17.604 228.826 (19.777)
(399.432)
322.260
6.1)110
(13.000)
269
6.0110
162,245
i.269
(62.038)
12.879
(8,048)
(16.508)
574.035
299.991
163.5118
287.1 12
78.041 894 1.763 22.702
140.806
303.650
S 291.943 S 299.991 S 147 000 S 163.508 S 311.997 8 374.035
56 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
Retirement Other Governmental / Total Governmental Adjustments Statements of
Fund Nonmaior Funds Funds (Note 2h) Net Position
2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
61,097 14,479
43.194 8.784 50 9,100 783 5.S78
38,961 6,18] 1,233 9,228 209 5,540
38,961 6,181
9,228 209 5,527 1,210
$ 62.186 $ 45.550 S 42.501 S 526,932 $ 583,875 S 36,832 S (27,227) S 563,764 S 556,648
15,525
686
555
43,194 8,784
(50)
(1,233)
10 19
43
(59) 50
(13) 1,210
9,100 783 5,819 50
51,098 17,352 5,401
48,621 20,166 4,164
51.098 17,352 5.401
48,621 20,166 4,164
12,825
(27,255)
4,075 15.766 29,696
5,954 54,225 12,728
5.922
3,530 26,068 179.181 75,579
6.905 268,497
4,158 15,490 28,490
6,61 I 54,606 14,213
6,707
3.597 26,051 177,695 77,712
4,786 296,768
19 25 (105) (7) 42 6
(92) (10) 1,762 (IS7) 31.235 (6,681) (9.567) (182.962) 202 12,063|1010|200 263 (9) (159) 489 2
(27) 1,951 134 30.894 (7,008) (13,334) (160,565) 13
12,083
4,094 15,791 29.591
5,947 54,267. 12,734
5,830
3,520 27,830 178.994 106.814 (6,681) (2,662) 85,535 202 12.063
4,166 15.690 28,753 6,602 54,447 14,702 6,709 3,570 28,002 177.829 108.606 (7,008) (8,548) 136,203 13
12,083
27,857 19.894
102.670 117.474
(I 13.695) (9.970)
113,695 119,520 921,341
(102,670) (6,292)
314.698
216.772
937.02X (277.922) (244.027)
(3,629) (238.214) (206.033)
109.550 643.419
111,182 693,001
— (399,432)
175,245 39,281 (39.281)
179.224 185,6X5 (185.685) 322.260 104.000 99.045
305.097
— 399.432
(175.245) (179.224)
(39.2X1) (185,685)
.30.2X1 1X5.685
(175.245)
175.245
(322.260)
(104.000)
(99.045)
(305.097)
(62.969) 99.064 62.969 (99.064)
— - 76.484 10.739
4.524.206
69.555 S 45.930 S 820.495 S 883.464 S
FINANCIAL SECTION 57
Exhibit A-3
General Corporate Fund
Statements of Revenues, Expenditures and Changes in Fund Balance Budget and Actual on Budgetary Basis
Year ended December 31, 2017
Revenues:
Property taxes: Gross levy
Allowance for uncollectible taxes Net property tax levy Property tax collections Personal property replacement tax: Entitlement
Total lax revenue Adjustment for working cash borrowing Adjustment for estimated tax collections
Tax revenue available for current operation Interest on investments Land sales
Tax increment financing distributions Miscellaneous User charges Land rentals
Claims and damage settlements Equity transfer from capital improvement bond fund Fees, forfeits, and penalties Total revenues Expenditures:
Board of Commissioners
General Administration
Monitoring and Research
Procurement and Materials Management
Human Resources
Information Technology
Law
Finance
Engineering
Maintenance and Operations Claims and judgments
Total expenditures Revenues over (under) expenditures Fund balances at beginning of year Net assets available for future use Fund balances ut beginning of the year Fund balances at end of vcar
(in thousands"i>t dollars)
Original
Budget
Final
$ 223,946 (7.838) 216,108 5.627
18,164
239,899 (4,272)
235,627 800
18,164 239,899 (4,272)
11,025 8,116 47,000 19,000
6,000 351
235,627 800
I 1,025 8,116 47,000 19,000
6,000
327,919
4,496 17,387 31,270
9,567 60.905 17,359
8,386
3,684 28.835 187.035 30.617
351
327.919
399.541 (71.622)
160,721 (89.099)
71.622
4,496 17,387 31.270 9.567 60,905 17.359 8.386 3.684 28.835 187.035 30,617 399,541 (71.622) 160,721 (89,099)
71.6:
Actual Amounts
(14)
S 223,946 (7,838) 216,108 5,613
(14)
11,653
11,639 1,023 50 1,011 (1,802) 6,252 1,628 223
1.663
21,687
18,164 239,885 (4,272) 11,653 247,266 1,823 50 12,036 6,314 53.252 20.628 223 6,000 2,014 349,606"
423 1,658 2,180
841 6,733 2,802 2,465
155 2.774 10,469 23.712
54,212
75.899
5.627 89.099
94.726
4,073 15,729 29,090 8,726 54,172 14,557 5,921 3,529 26.061 I 76,566 • 6,905 345,329" 4.277 1 66.348
166.348
S 170,625 S 170.625
See accompanying notes lo the basic financial statements
58 FINANCIAL SECTION
Exhibit A-4 Retirement Fund
Statements of Revenues, Expenditures and Changes in Fund Balance Budget and Actual on Budgetary Basis
Year ended December 31, 2017
(m dwusands of dollars)
Retirement Fund
Revenues:
Property taxes
Personal property replacement tax Miscellaneous
Total tax revenue Operating expenditures: Pension costs
Total expenditures Revenues over (under) expenditures Fund balances at beginning ofthe year Fund balances at end ofthe year
Actual
Variance
with Final
Actual on Budget -
Final Budgetary Positive
Budget Basis (Negative)
$ 62,880 $ 61,097 $ (1,783)
16,625 14,479 (2,146)
—|99|3_
(3,926)
79,505 75,579
79,505 75,579 3,926
79,505 75,579 3,926
See accompanying notes to the basic financial statements
Exhibit A-5
Pension and Other Post Employment Benefits Trust Funds Statements of Fiduciary Net Position
Year ended December 31, 2017
(with comparative amounts'for prior year)
Assets Cash
Receivables
Employer contributions-taxes (net of allowance for uncollectible $3,883 in 2017; $3,753 in 2016)
Securities sold
Forward foreign exchange contracts Accrued interest and dividends Accounts receivable Total receivables
(in thousands of dollars) 2017 2016
89,604 42,172 123,333 3,733 43
,990 S 3,670
258,885
79,505 7,563 116,576 3,237 45
206.926
Investments at fair value
Corporate and governmental bonds and notes Money market funds Pooled funds - fixed income Pooled funds - equities Balanced funds Common and preferred stocks Mutual and commingled Equity funds Short-term investments Total'in vestments
249,812 16,994
247,005 97,893 17,449
576,588
342,484 30,689
1,578,914
234,275 5,590
256,464 81,809 16,013
524,405
285,515 32,493
,436,564
Securities lending capital Total assets
Liabilities
Accounts payable Securities lending collateral Forward foreign exchange contracts Securities purchased Total liabilities
1,374 27,448 124,384 17,037
170,243
1,274 42.118 1 16.937 1 1.507
171,836
Net position restricted for pension and OPEB benefits
See accompanying notes lo the basic financial statements
60 FINANCIAL SECTION
Exhibit A-6
Pension and Other Post Employment Benefits Trust Funds Statements of Changes in Fiduciary Net Position
Year ended December 31, 2017
(widi comparative amounts for prior year)
Additions:
Contributions:
Employer contributions Employee contributions Retiree contributions Total contributions Investment income:
Net appreciation (depreciation) in fair value of investments Interest and dividend income
Total investment income (loss) Less investment expenses
Investment income (loss) net of expenses Security lending activities: Security lending income Borrower rebates Bank fees
( Net income from securities lending activities Other
Total additions
Deductions:
Annuities and benefits Employee annuitants Retiree health care benefits Surviving spouse annuitants Child annuitants Ordinary disability benefits Duty disability benefits
Total annuities and benefits Refunds of employee contributions Administrative expenses Total deductions
Net increase (decrease)
Net position held in trust tor pension and OPEB benefits Beginning ol year Ir!nd of vcar
108,289 20.840
(in thousands of dollars) 2017 2016
129,129
100.177 20,831 7.917
198,551 25,979
128.925
224,530 (4,663)
99,340 29,016
219,867
128.356 (4,656)
448
(13)
(89)
123,700
346
265 295 (126)
434
349,345
107
127,099 13,431 24.203 142 631 77
253.166
168.160 2.011 1.535
121,730 22,835 22,919 153 413 110
171.706
165,583 2.560 1,651
81.460
169.794
1.517,442
I 79,551
1.435.982
$ 1.696.994 S 1,517,442
See accompanying notes to the basic financial statements
NOTES TO THE BASIC FINANCIAL STATEMENTS
Notes to the Basic Financial Statements
Metropolitan Water Reclamation District of Greater Chicago
Index to Notes
Note Page Number
1. Summary of Significant Accounting Policies. . 64
Financial Reporting Entity . . . 64
Government-wide and Fund Financial Statements 64
Basis of Accounting and Measurement Focus 71
Budgeting (Appropriations).. 71
Deposits with Escrow Agent 73
Certificates of Deposit 73
Investments 73
Inventory 73
i. Prepaid Assets 73
j. Restricted Assets 73
k. Intcrfund Transactions 73
I. Capital Assets 74
m. Compensated Absences 74
n. Deferred Outflows/Inflows of Resources 75
Long-Term Obligations 75
p. Fund Balances ' 75
q. Net Position 76
r. User Charge 76
s Comparative Data and Reclassifications 76
Use of Estimates 76
u. New Accounting Pronouncement 76
Reconciliation of Fund and Government-wide Financial Statements 77
Reconciliation of Total Fund Balances to Total Net Position 77
Reconciliation ofthe Change in Fund Balances to the Change in Net Position 78
Reconciliation of Budgetary Basis Accounting to GAAP Basis Accounting 79
Deposits and Investments ........ 79
Receivables, Deferred Inflows of Resources and Payables 92
Capital Assets 94
Pension Plan .95
OPEB - Other Post-Employment Benefits . . 99
Commitments and Rcbatablc Arbitrage Earnings . , . . . 10]
Risk Management and Claims 103
Long-Term Debt ... ... .105
Interl'iind Transactions Ill
Property Tax Extension Limitation Law . ... 112
Leases 112
Tax Abatements ... .113
FINANCIAL SECTION 63
Notes to the Basic Financial Statements
Year ended December 31, 2017
1. Summary of Significant Accounting Policies
The significant accounting policies ofthe Metropolitan Water Reclamation District of Greater Chicago (District) conform to generally accepted accounting principles (GAAP) in the United States of America as applicable to governmental units and are described below.
Financial Reporting Entity - The District is a municipal corporation governed by an elected nine-member Board of Commissioners. As required by GAAP, these financial statements present the District (the primary government) and its component units, the Metropolitan Water Reclamation District Retirement Fund (Pension Trust Fund - Note 7) and the Metropolitan Water Reclamation District Retiree Health Care Trust Fund (OPEB Trust Fund - Note 8). The Board of Trustees for the Pension Trust Fund is composed of seven members. Two of these Trustees are Commissioners appointed by the Board of Commissioners ofthe District, four are District employees elected by members of the fund and one is a retired employee of the District. Although the Pension Trust Fund and OPEB Trust Fund are legally separate entities, for which the primary government is not financially accountable, they arc included in the District's basic financial statements as fiduciary funds. The nature and significance of the Pension Trust Fund and OPEB Trust Fund's relationship with the primary government is such that exclusion would render the District's financial statements incomplete or misleading. Complete financial statements of the Pension Trust Fund can be obtained from their administrative office at 111 East Erie Street, Chicago, Illinois, 60611-2898 or on their website: mwrdrf.org . Complete financial statements ofthe OPEB Trust Fund can be obtained from the Treasurer ofthe Metropolitan Water Reclamation District at 100 East Erie Street, Chicago, Illinois 60611-5498 or on the District's website: mwrd.org .
Government-wide and Fund Financial Statements - The District's basic financial statements include government-wide financial statements and fund financial statements.
The government-wide financial statements include the Statements of Net Position and the Statements of Activities, and contain information for all the District's governmental activities but exclude the Pension Trust Fund and the OPEB Trust Fund, fiduciary funds whose resources are not available to finance the District's operations. The effect of interfund transactions has been removed from the government-wide statements. The Statements of Net Position report the financial condition ofthe District. This statement includes all existing resources and obligations, both current and non-current, with the difference between the two reported as net position. The Statements of Activities report the District's operating results for the year with the difference between expenses and revenues representing the changes in net position. Expenses are reported by department while revenues are segregated by program revenues and general revenues. Program revenues contain charges forservices including user charges, land rentals, fees, forfeitures, penalties and capital grants. General revenues include taxes, interest on investments, and all other revenues not classified as program revenues.
In government, the basic accounting and reporting entity is a "fund." A fund is defined as an independent fiscal and accounting entity, with a self-balancing set of accounts which record financial resources, together with all related liabilities, obligations, reserves, and equities, which arc segregated for the purpose of carrying on specific activities or attaining certain objectives, in accordance with special regulations, restrictions or limitations. Separate fund financial statements arc included in the basic financial statements for the major governmental funds. The emphasis ofthe governmental fund financial statements is on major funds, with each major fund displayed as a separate column. The governmental fund financial statements include a budgetary statement for the General Corporate Fund and the Retirement Fund.
As a special purpose government, the District has elected lo make a combined presentation of the governmental fund statements and the government-wide statements, therefore, the basic financial statements include combined Governmental Funds Balance Sheets/Statements of Net Position (Exhibit A-l) and combined Statements of Governmental Fund Revenues, Expenditures, and Changes in Fund Balances/Statements of Activities (Exhibit A-2). Individual line items of the governmental fund financials are reconciled to government-wide financials in a separate column on the combined presentations, with in-depth explanations offered in Note 2.
64 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
The District reports the following major governmental funds: General Corporate Fund
The fund was established to account for an annual property tax levy, and certain other revenues, which are to be used for the payments of general expenditures ofthe District not specifically chargeable to other funds. Included in this fund are accounts maintained by the District restricted to making temporary loans to the Corporate Fund. These accounts were established under Chapter 70, ILCS 2605/9b ofthe Illinois Compiled Statutes, which refers to these accounts as a "Working Cash Fund." Amounts borrowed from the Working Cash Fund in one year arc generally repaid by the Corporate Fund from tax collections received during the subsequent year. Also included in this fund are accounts ofthe "Reserve Claim Fund," established under Chapter 70, ILCS 2605/12 ofthe Illinois Compiled Statutes, which is restricted for the payment of claims, awards, losses, judgments or liabilities which might be imposed against the District, and for the repair or replacement of certain property maintained by the District. The assets, liabilities, deferred inflows of resources and fund balances of the General Cotporate Fund, detailed as to the Corporate, Working Cash, and Reserve Claim account divisions at December 31, 2017 are as follows (in thousands of dollars):
Total General Corporate Fund
Corporate Division
Corporate Working
Cash Division
Reserve Claim Division
Assets
Cash
Certificates of deposit Investments Prepaid insurance Receivables.
Property taxes receivable
Allowance for uncollectible taxes Taxes receivable, net
User charges
Miscellaneous Due from Stormwater Management Fund Restricted deposits Inventories
Total assets
Liabilities, Deferred Inflows and Fund Balances
Liabilities'
Accounts payable and other liabilities Unearned revenue Due to corporate fund from corporate working cash
Total liabilities Deferred inflows of resources: Unavailable lax revenue
Total deferred inflows of resources Fund balances' Nonspendable:
Prepaid insurance Inventories Restricted for. Deposits Working cash Reserve claims Unassigned (Deficit)
Total fund balances
Tola! liabilities, deferred inflows and fund balances
21,162 116,881 99,282 4,101
234,532 (12,730) 221,802 2,782 5,817 101 527 34,787 507,242
21,924 8,139
30,063
185,236 185.236
4.101 34.787
527 280,437 25.890 (53.799) 2') 1,943 507.242
18,374 25,229 78,339 4,101
90.437
228.515 (12,406) 216,109 2,782 5,537 101 527 34,787
385.886 S
21,650 $ — 8.139 — 190.000 (190.000) (190.000)
219,789
180.481
180.481
4.111] 34.787
280.437
(14.384)
(53.7991
3X5.88(1
280.437
90.437 S
1,413 21.569 1,964
6,017 (324)
5.693
280
30.919
274
274
4.755
4.755
25.890
25.800
30.010
FINANCIAL SECTION 65
Notes to the Basic Financial Statements
Year ended December 31, 2017
The revenues, expenditures, and changes in fund balances ofthe General Corporate Fund, detailed as lo the Corporate. Working Cash, and Reserve Claim account divisions for the year ended December 31, 201 7, are as follows (in thousands of dollars):
Total General Corporate ' Corporate Fund Division
Corporate
Working Reserve
Cash Claim
Division Division
Revenues:
Property taxes
Personal property replacement tax
Total tax revenue Interest on investments Land sales
Tax increment financing distributions Claims and damage settlements Miscellaneous User charges Land rentals
Fees, forfeits and penalties Total revenues Operations:
Board of Commissioners
General Administration
Monitoring and Research
Procurement and Materials Management
Human Resources
Infonnation Technology
Law
Finance
Engineering
Maintenance and Operations Claims and judgments
Total expenditures
212,679 28,715 241,394 3,006 50 9,100 199 3,888 51,098 17,352 3,915 330,002
4,075 15,766 29,696
5,954 54,225 12,728
5,922
3,530 26.068 179,181
6.905 344,050
207,350 28,715 236,065 1,628 50 9,100 189 3,888 51,098 17,352 3,915 323,285
4,075 15,766 29,696
5,954 54,225 12,728
5,922
3,530 26,068 179,1 SI
337,145
5,329
5,329 332
10
5.671
6.905
6.905
Revenues over (under) expenditures
Other financing sourccs/(uses): Equity transfer in/(out)
Net Change in Fund balance
Fund balance at the beginning of year Fund balance at the end of year
Debt Service Fund
A sinking fund established to account for annual property tax levies and certain other revenues, principally interest on investments, which are restricted to be used for the payment of interest and redemption of principal on bonded debt.
Capital Improvements Bond Fund
A capital projects fund established to account for the proceeds of bonds authorized by the Illinois General Assembly, bond anticipation notes net of redemption's, government gi ants, and certain other revenues, which are all restricted to be used in connection with improvements, replacements, and additions to designated environmental improvement projects.
66 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
Retirement Fund
A special revenue fund established in accordance with statutory requirements to account for the annual property taxes and personal property replacement tax (PPRT), which arc specifically levied to finance pension costs. These taxes are collected and paid to the Pension Trust Fund (sec Note 7).
The District reports the following non-major governmental funds:
Construction Fund
A capital projects fund established to finance smaller construction projects on a pay-as-you-go basis. The Fund is primarily financed with an annual property tax levy and certain other revenues to be used to finance modernization and rehabilitation projects. Included in this fund are accounts maintained by the District restricted to making temporary loans to the Construction Fund. These accounts were established under Chapter 70, ILCS 2605/9(c) of the Illinois Compiled Statutes, which refers to these accounts as a "Construction Working Cash Fund." Amounts borrowed in one year are generally repaid by the Construction Fund from tax collections received during the subsequent year. The assets, liabilities, deferred inflows of resources and fund balances ofthe Construction Fund, detailed as to the Working Cash and Construction account divisions at December 31, 2017 are as follows (in thousands of dollars):
Assets
Cash
Certificates ol"deposit
Investments
Receivables.
Property taxes receivable
Allowance for uncollectible taxes Taxes receivable, net Miscellaneous
'total assets
Liabilities, Deferred Inflows of Resources, and Fund Balances
Liabilities:
Accounts payable and other liabilities
Due to Construction Fund from Construction Working Cash
Total liabilities
Deferred inflows of resources:
Unavailable tax revenue
Total deferred inflows of resources
Fund balances:
Restricted for.
Working cash
Unassigned
Total fund balances
Total liabilities, deferred inflows, and fund balances
Construction Working Cash
152 8,050 2,002
Division
1,023 $ 4,005 12,501
16.549 (847)
15,702
10.204
746
33.977 S
3,171 $ —
12,000 (12,000) (12,000)
15.171
13.110
13.110
22,204
5.696
5,696
:.204
10.204
FINANCIAL SECTION 67
Notes to the Basic Financial Statements
Year ended December 31, 2017
The revenues, expenditures, and changes in fund balances ol" the Construction Fund, detailed as to the Construction and Working Cash account divisions for the year ended December 3 1, 2017, are as follows (in thousands of dollars):
Total Construction Fund
Construction Division
Construction Working Cash Division
Revenues:
Property taxes
Total tax revenue Interest on investments Miscellaneous Fees, forfeits and penalties
Total revenues Construction Costs: Contractual services Machinery and equipment Capital projects
Total expenditures
12,995 S
12,995 326
1,486
14,807
1,680 3,000 9,112
13,792
12,995 $
12,995 193
1,486
14,674
1,680 3,000 9,112
13,792
Revenues over (under) expenditures
Other financing sources (uses): Equity transfer in/(out)
Net Change in Fund balance
Fund balance at the beginning of year Fund balance at the end of year
68 FINANCIAL SECTION
Metropolitan Water Reclamation District o f Greater Chicago
Stormwater Management Fund
A capital projects fund established to account for the annual property taxes which are specifically levied to finance all activities associated with stormwater management, including construction projects. Included in this fund are accounts maintained by the District restricted to making temporary loans to the Stormwater Management Fund. These accounts were established under Chapter 70, ILCS 2605/9(e) of the Illinois Compiled Statutes, which refers to these accounts as a "Stormwater Working Cash Fund." Amounts borrowed in one year are generally repaid by the Stormwater Management Fund from tax collections received during the subsequent year.
The assets, liabilities, deferred inflows of resources and fund balances of the Stormwater Management Fund, detailed as to the Working Cash and Stormwater Management account divisions at December 31,2017 are as follows (in thousands of dollars):
Assets
Cash
Certificates of deposit Investments Prepaid Insurance Receivables:
Property taxes receivable Allowance for uncollectible taxes Taxes receivable, net Total assets
Stormwater Management Division
¦ 1,413 S 6.007 18,455 79
41,546 (2,120)
39,426
65,380 $
Stormwater Working
Cash Division
|1010|11,007
,009
Liabilities, Deferred Inflows, and Fund Balances
Liabilities:
Accounts payable and other liabilities
Due to Stormwater Management Fund from Stormwater Working Cash Total liabilities Deferred inflows of resources: Unavailable tax revenue
Total deferred inflows of resources Fund balances: Nonspcndable:
Prepaid Insurance Restricted for: Working Cash Capital projects Unassigned
Total fund balances
Total liabilities, deferred inflows, and fund balances
,715 $ 101
,816
32,918
32,918
79
37.509 4.146 (79)
41.655
7(.,389 S
1,715 $ —
26,601 (26,500) (26,500)
28.316
32,918
32.918
79
37.509
4.146
4,146 (79)
65.380
37.509
1 1,009
FINANCIAL SECTION 69
Notes to the Basic Financial Statements
Year ended December 31, 2017
The revenues, expenditures, and changes in fund balances ofthe Stormwater Management Fund, detailed as to the Stormwater Management and Working Cash account divisions for the year ended December 3 1, 2017, arc as follows (in thousands of dollars):
Total Stormwater Management
Fund
Stormwater Management Division
Stormwater Working
Cash Division
Revenues:
Property taxes
Total tax revenue Interest on investments Claim and damage settlements Miscellaneous revenue
Total revenues Construction Costs: Personal services Contractual services Material and supplies Capital projects
Total expenditures
32,555 $
32,555 360 10 19
32,944
6.087 1,604 462 5.912
14,065
32,555 S
32,555 235 10 19
32,819
6,087 1,604 462 5,912
14,065
Revenues over expenditures
Other financing (uses): Equity transfer in/(out)
Net Change in Fund balance
Fund balance at the beginning of year Fund balance at end of year
In addition, the District reports the following fiduciary funds: Pension Trust Fund
A fiduciary fund established to account for employer/employee contributions, investment earnings, and expenses for employee pensions. The balance reflected as employer contributions receivable represents amounts due to the plan pursuant to legal requirements.
OPEB Trust Fund
A fund established (pursuant to 70 ILCS 2605/9.6(d)) to administer the defined benefit, post-employment health care plan. The intention ofthe District is that the Fund satisfies the requirements of Section 115 ofthe Internal Revenue Code of 1986, as amended. A private letter ruling regarding the exclusion ofthe Trust's income from moss income under Section 115 has been received from the IRS
70 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
Basis of Accounting and Measurement Focus Government-wide and Fiduciary Fund Financial Statements
The government-wide and fiduciary financial statements arc reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless ofthe period of related cash flows. Property taxes are recognized in the year of levy and personal property replacement taxes are recognized in the year canted. Grants and similar items are recognized as revenue in the fiscal year that all eligibility requirements have been met.
Governmental Fund Financial Statements
The District's governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual basis, revenues are recognized when they become measurable and available to finance operations. Expenditures are recognized in the period in which the fund liability is incurred except for principal and interest on long-term debt, compensated absences, claims, judgments, and arbitrage, which are recognized when due and payable.
The accounting and reporting treatment applied to the capital assets and long-term liabilities associated with a fund are determined by its measurement focus. Since governmental funds arc accounted for on the current financial resources measurement focus, only current assets and current liabilities are included on their balance sheets. Their reported fund balance (net current assets) is considered a measure of "available spendable resources." Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Accordingly, they are said to present a summary of sources and uses of "available spendable resources" during a period.
Property taxes, user charge revenue, interest, land rentals, and personal property replacement lax revenue are susceptible to accrual. In general, the revenue recognition period is limited to amounts collected during the period or within sixty days following year-end. Revenues that are unavailable are reported as deferred inllows of resources.
Grants from federal and State agencies are recorded as revenues in the fund financial statements when reimbursable expenditures are incurred, or other eligibility requirements imposed by the provider arc met, and the grant resources are measurable and available.
Property taxes attach as an enforceable lien on property as of January 1 ofthe levy year. They are levied and recorded as a receivable as of January 1 and are due in two installments in the following year. T he annual ordinance for the levy of taxes contains a reserve for loss in collection of taxes. The District reviews the reserve annually.
Budgeting (appropriations) - The District's fiscal year begins January I and ends on December 3 I. The District's procedure for adopting the annual budget consists ofthe following stages:
After the first half of the fiscal year, the Budget Office holds a meeting with departmental budget representatives to discuss policy and procedures for budget preparation that begins in July. Instructions are distributed to departments, together with guidelines from the Executive Director, which indicate the direction the Budget should follow for the coming fiscal year. The basic forms are returned to the Budget Office and a general summary is prepared for the Executive Director, who conducts departmental hearings in August.
The public budget process begins with Board of Commissioners Study Sessions providing a budget overview in June.
FINANCIAL SECTION 71
Notes to the Basic Financial Statements
" Year ended December 31, 2017
A revenue meeting is conducted by the Executive Director, Administrative Services Officer, and Budget Officer, along with those departments responsible for revenue items. Available resources used to finance the Budget are analyzed at this meeting.
When departmental estimates arc approved and final decisions are made, a Budget Message is prepared and the proposals ofthe Executive Director become the initial budget document. After departmental requests are finalized, the Executive Director's Budget Recommendations are published within 15 days. The Executive Director's Budget Recommendations arc published and presented lo the Board in October. At all times, the Budget figures are balanced between revenues and expenditures.
The Board's Committee on Budget and Employment holds public meetings with the Executive Director and department heads regarding the Executive Director's proposals.
At the conclusion of these hearings, the Committee on Budget and Employment recommends the preparation of a second document, a supplement to the Executive Director's Budget .Recommendations called the "Tentative Budget," which incotporates changes approved at the hearings. Once printed, this is placed on public display, along with the Executive Director's Budget Recommendations, for a minimum of 10 days. An advertisement is published in a general circulation newspaper announcing the availability ofthe Tentative Budget for inspection at the main office ofthe District, and specifying the time and dale ofthe public hearing.
At least one public hearing is held between 10 and 20 days after the Budget has been made available for public inspection. All interested individuals and groups are invited to participate.
After the public hearing, the Committee on Budget and Employment presents the Tentative Budget, which includes revisions and the approved Appropriation and Tax Levy Ordinances, to the Board for adoption. This action must lake place before January 1.
The Budget, as adopted by the Board, can be amended once at the next Regular Meeting of the Board. No amendment, however, can be requested before a minimum of five days after the Budget has been adopted. Amendments for contracts and/or services not received before December 31 must be re-appropriated in the new Budget and are included through this amendment process.
The final budget document "As Adopted and Amended" is produced, and an abbreviated version, known as the "short form" is published in a newspaper of general circulation before January 20 ofthe fiscal year.
Budget implementation begins on January 1. The Finance Department and Budget Office provide control of appropriations and ensure that all expenditures are made in accordance with budget specifications. The manual entitled "Budget Code Book" is published in conformance with the Adopted Budget and is used lo administer, control, and account for the Budget.
Supplemental appropriations can be made for the appropriation of revenues from federal or state grants, loans, bond issues, and emergencies. The Executive Director is authorized to transfer appropriations between line items within an object class of expenditure within a department. After March I of each fiscal year, transfers of appropriations between objects of expenditures or between departments must be presented for approval to the Board in accordance with applicable statutes.
(l.3)The Board can authorize, by a two-thirds majority, the transfer of accumulated investment income between funds and the transfer of assets among the Working Cash Funds.
72 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
Deposits with escrow agent in the amount of 5280,000 arc currently held with the District's workman's compensation third party provider, all others (if any) represent cash with the escrow agent for the subsequent payment of interest on debt.
Certificates of deposit arc stated at cost plus accrued interest.
Investments of the Governmental Funds are reported at fair value plus accrued interest. The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date. Changes in the carrying value of investments, resulting in realized and unrealized gains or losses, arc reported as a component of investment income in the statement of revenues, expenses and changes in fund balances.
Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term that could materially affect the amounts reported in the statement of net position and in the statement of revenues, expenses and changes in fund balances.
The investment with the State Treasurer's Illinois Funds is measured at the net asset value per share provided by the pool. The Illinois Funds are not registered with the SEC. State statute requires the State Treasurer's Illinois Funds to comply with the Illinois Public Funds Investment Act (30 IECS 235). Oversight is provided by the State Treasurer. Investments ofthe Pension and OPEB Trust Funds, other than short-term investments, are also stated at fair value.
Inventory, consisting mainly of materials, supplies, and repair parts which maintain and extend the life of the District's Treatment facilities, is reported on the Balance Sheet of the General Corporate Fund and the government-wide Statements of Net Position. The District maintains a perpetual record-keeping system and uses a moving-average method, based on cost, for pricing its storeroom inventories. Materials, supplies, and repair parts arc recorded as expenditures/expenses when consumed.
i. Prepaid assets represent services the District has paid for but has not received the full benefit. Prepaids are
recorded as expenditures/expenses when consumed.
Inventory balances and prepaid insurance at year-end are reported as nonspendable fund balance in the governmental funds.
j. Restricted assets represent cash and investments set aside pursuant to real estate escrow and intergovernmental agreements.
k. Interfund transactions represent governmental fund transactions for the following: a) loans between funds reported as due to /due from other funds; b) reimbursements between funds reported in the fund financials as expenditures in the reimbursing fund and a corresponding reduction in expenditures in the reimbursed fund; and c) transfers between funds. All interfund transactions are eliminated in the government-wide financial statements. See Note 12 for further disclosure of interfund transactions.
FINANCIAL SECTION 73
Notes to the Basic Financial Statements
Year ended December 31, 2017
1. Capital Assets including land (and land improvements), buildings, equipment, computer software, infrastructure, acquired easements, and construction in progress are recorded at historical cost or estimated historical cost in the government-wide financial statements. Interest costs are not capitalized. Infrastructure assets include the District's sewers, water reclamation plants (WRP,) waterway assets, TARP deep tunnels, and drop shafts. The thresholds for reporting capital assets are as follows:
Land and buildings SI00,000 and over
Infrastructure $500,000 and over
Equipment $20,000 and over
Computer software $ 100,000 and over
Depreciation and amortization of capital assets is provided on the straight-line method (using a ten percent salvage value for equipment) over the following estimated useful lives:
Buildings and land improvements 80 years
Infrastructure (TARP deep tunnels and drop shafts only) 200 years
Equipment 6-50 years
Computer software 5 years
The District is using the modified approach as an alternative to depreciation to report its eligible infrastructure assets, with the exception ofthe TARP deep tunnels and drop shafts, which are depreciated. The modified infrastructure assets are categorized into networks, systems, and subsystems. Each ofthe District's seven WRPs represents a separate network and the waterway assets are an eighth network. The systems within the networks are categorized by the process flow through the network (i.e., collection system, treatment processes system, solids processing system, flood & pollution control system, or drying solids/utilization system). The subsystems represent the major processes of each system (e.g., fine screens and grit chambers arc subsystems ofthe treatment processes system). Condition assessments at each network are performed at the subsystem level and these assessments are compiled into a single assessment for each system. The rating scales used in the condition assessments are explained in the Required Supplementary Information immediately following the notes. Infrastructure assets reported under the modified approach are not depreciated, since the District manages these assets using an asset management system, and documents that the assets are being preserved at a level of acceptable or better, as evidenced by a condition assessment.
In compliance with Governmental Accounting Standards Board (GASB) Statement 34, existing infrastructure assets accounted for with the modified approach are not reported in the government-wide financial statements until an initial condition assessment is completed for the assets' network. Currently, all the District's WRPs infrastructure assets are reported as infrastructure under the modified approach in the govcrnmcnt-widc financial statements. Condition assessments of eligible infrastructure assets must be completed at least every three years following the initial assessments. The Kirie, Central (Stickney ), Hanover, O'Brien, Egan. Calumet, Lemont WRPs, and Waterways had their initial condition assessments completed between 2002 and 2006. The Kirie. Central (Stickney) and Waterways each had its most recent condition assessment completed in 2017. The Egan and O'Brien networks each had its most recent condition assessment completed in 2016. The Hanover, Calumet and Lemont networks each had its most recent condition assessment completed in 201 5. (See further discussion ofthe modified approach in the Required Supplementary Information Section).
Modified infrastructure assets under construction are reported in the government-wide financial statements as construction in progress, and are reclassified to infrastructure assets when construction is substantially complete.
m. Compensated Absences for accumulated unpaid vacation, holiday, overtime, severance and sick leave arc paid to employees upon retirement or termination. An employee is eligible to receive 100 percent of earned
74 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
vacation, holiday and overtime pay. Depending upon the date ofhire and/or collective bargaining agreements, employees may also be eligible to receive severance pay and 50% of accumulated sick pay up to a maximum of sixty days. Compensated absences are accrued as they arc earned in the government-wide financial statements. Expenditures and liabilities for compensated absences are recorded in the fund financial statements when due and payable. Included in the long-term liabilities ofthe Statements of Net Position at December 31, 2017, arc liabilities for compensated absences of $2,516,000, due within one year, and $22,811,000, due in more than one year.
n. Deferred Outflows/Inflows of Resources - Deferred inflow of resources is an acquisition of net position by the government that is applicable to a future period. Deferred outflow of resources is a consumption of net position by the government that is applicable to a future reporting period.
o. Long-Term Obligations - Long-term debt and other long-term obligations arc reported in the government-wide Statements of Net Position. Bond premiums are reported with bonds payable and amortized over the life of the bonds, which approximates the effective interest method, in the government-wide financial statements. In addition, the refunding transaction cost, representing the excess of the amount required to refund debt over the book value ofthe old debt, is reported as a deferred outflow of resources and amortized over the shorter ofthe life ofthe old debt or new debt in the govcrnmcnt-widc financial statements.
The face amounts ofthe debt and bond premiums arc recognized as other financing sources during the issuance period in the fund financial statements, while bond discounts arc reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, and refunding costs are recognized as debt service expenditures in the fund financial statements.
p. Fund Balances - The Board of Commissioners on December 9,2010, adopted a new fund balance classification policy in accordance with GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions: The policy categorizes the balances of governmental funds into the following categories: nonspendable, restricted, committed, assigned and unassigned fund balances. The categories are described as follows:
• Nonspendable Fund Balance - This consists of amounts that cannot be spent because they are either not in spendable form, or arc legally or contractually required to be maintained intact.
Restricted Fund Balance - Reported when constraints placed on the use of resources arc cither externally imposed by creditors, grantors, contributors, or laws or regulations of other governments; or imposed by law through constitutional provisions or enabling legislation.
Committed Fund Balance - This consists of amounts that can only be used for specific purposes pursuant to constraints imposed by a board motion. The District's commissioners shall establish, modify, or rescind a fund balance commitment by vote of a motion presented to the Board.
Assigned Fund Balances - This consists of amounts that arc constrained by the District's intent to be used for specific purposes, but arc neither restricted nor committed. The District's Board of Commissioners approved a motion authorizing the Executive Director to assign amounts of fund balances to a specific purpose. The District has an assigned fund balance of SI47,473,000 in the Capital Improvement Bond Fund, for future capital projects.
Unassigned Fund Balances - This classification represents fund balance that has not been restricted, committed, or assigned to specific purposes within the general fund.
In the General Corporate Fund, the District considers restricted amounts to have been spent first when an expenditure is incurred for purposes for which restricted fund balance is available, followed by committed
FINANCIAL SECTION 75
Notes to the Basic Financial Statements
Year ended December 31, 2017
amounts, and then assigned amounts. Unassigned amounts are used only after the other categories of fund balance have been fully utilized. In governmental funds other than the General Corporate Fund, the District considers restricted amounts to have been spent last. When an expenditure is incurred for purposes for which restricted fund balance is available, the District will first utilize assigned amounts, followed by committed amounts, and then restricted amounts.
q. Net Position - The government-wide Statements of Net Position display three components of net position, as follows:
Net investment in capital assets - This consists of capital assets, net of accumulated depreciation, less the outstanding balances of any debt attributable to capital assets (net of unspent bond proceeds).
Restricted Net Position - This consists of net position that is legally restricted by outside parties, or by law through constitutional provisions or enabling legislation. Net position restricted for working cash and reserve claims is based on legal restrictions, while net position restricted for debt service and capital projects is based on legal restrictions and/or outside parties. The government-wide statement of net position reports $700,839,000 of restricted net position.
Unrestricted Net Position - This consists of net position that does not meet the definition of "restricted" or "net investment in capital assets."
r. User Charge - The Environmental Protection Agency requires grant recipients to charge certain users of waste water treatment services a proportionate share of the cost of operations and maintenance. The District has utilized a User Charge System since January 1, 1980. The system was developed in accordance with 70 ILCS 2305/7.1.
s. Comparative Data and Reclassifications - The basic financial statements present comparative data for the prior year to provide an understanding ofthe changes in financial position and results of operations, but not at the level of detail required for presentation in accordance with accounting principles generally accepted in the United States of America.
t. Use of Estimates - The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, deferred outflows, liabilities and deferred inflows, disclosure of contingent assets and liabilities al the date ofthe financial statements and the reported amounts of revenues and expenditures/ expenses during the reported period. Actual results could differ from those estimates
u. New Accounting Pronouncement - The OPEB Trust implemented GASB 74, Financial Reporting For Postemployemcnt Benefit Plans Other Than Pension Plans. The District will be implementing statement GASB 75, Accounting and Financial Reporting For Poslemploymenl Benefits Oilier Than Pensions, in 2018.
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Metropolitan Water Reclamation District of Greater Chicago
Reconciliation of Fund and Government-wide Financial Statements
a. Reconciliation of Total Fund Balances to Total Net Position - The following explanations are provided for the reconciling adjustments shown in the Governmental Funds Balance Sheets/Statements of Net Position at December 3 1, 2017 (in thousands of dollars):
Total fund balances of governmental funds S 820.495
Amounts reported for governmental activities in the Statements of Net Position are different because' Capital assets are not current financial resources and therefore arc not reported as assets in governmental funds. However, capital assets are reported in the Statements of Net Position. The cost of capital assets and accumulated depreciation is as follows:
Capital assets 7,891,314 Accumulated depreciation/amortization (296,872) Capital assets, net 7.594,442 Long-term liabilities are not due and payable in the current period and accordingly are not reported as liabilities in governmental funds. However, long-term liabilities are reported in the Statements of Net Position. The long-term liabilities consist of:
Compensated absences (22,811)
Claims and judgments (30,669)
Capital lease (38,574)
Rond anticipation notes (296,529)
General obligation debt (2,697,667)
Net OPEB obligation (1 1,312)
Net Pension liability (1,079,566)
Due to Pension Trust Fund (73.990)
Total long-term liabilities (4.251.1 18)
Bond refunding transactions are recorded as deferred outflows of resources in the governmental funds
while bond premiums and discounts are recorded as other financing sources and uses, respectively. Bond
premiums are amortized over the life ofthe bonds for the Statements of Net Position. They consist of:
Bond premium (182,248)
Bond refunding transactions 4.S99
Total bond premium and refunding transactions (177.349)
Interest on debt is not accrued in governmental funds, but rather is recognized as a liability and an
expenditure when due Interest is recorded as a liability as it is incurred in the Statements of Net
Position. The 2017 amount is:
Accrued interest (15.899) Some assets reported in governmental funds do not increase fund balance because the assets arc not "available" to pay for current-period expenditures. These assets are offset by deferred inflow of resources in the governmental funds. However, these assets increase net position in the Statements of Net Position They consist of:
Deferred property taxes and personal property replacement tax 477,980
Grants and rents 944
Deferred inflows for other pension amounts (15.102)
Adjustment to deferred inflow of resources 463.822 Deferred outflows of resources represent items related to pension, which will be recognized as a pension expense m future reporting periods. Deferred outflows consist of employer contributions and "other" which includes differences between expected and actual experience, changes of assumptions, and net differences between projected and actual earnings on pension plan investments. However, these items arc reported in the Statement of Net Position. They consist of:
Deferred outflows for employer contributions subsequent to measurement dale 89.858
Deferred outflows other pension related amounts 92,1 78
Adjustment to deferred outflows of resources 182.036
Interfund transactions arc eliminated for Government-wide reporting These transactions consist of
Due from other funds 101
Due to other funds (101 )
Total liiterfund —
Total net position of governmental activ ities S 4.616,429
FINANCIAL SECTION 77
Notes to the Basic Financial Statements
Year ended December 31, 2017
h. Reconciliation ofthe Change in Fund Balances to the Change in Net Position - The following explanations arc provided for the adjustments shown in the Statements of Governmental Fund Revenues, Expenditures, and Changes in Fund Balances/Statements of Activities for the year ended December 31, 2017 (in thousands of dollars):
Net change in fund balances of governmental funds S (62,969)
Amounts reported for governmental activities in the Statements of Activities are different because.
Construction costs for capital outlays are reported as expenditures in governmental funds. However, in the Statements of Activities, the cost of capital assets is allocated over their estimated useful lives as depreciation expense except for those assets under the modified approach. In the current period, these amounts arc:
Construction costs and other capital outlays 182,962
Depreciation expense-allocated to various departments (3.128)
Depreciation/amortization expense-unallocated (12,063)
Excess of construction and capital outlay costs over depreciation expense 167,771
Debt proceeds provide current financial resources to governmental funds. However, issuing debt increases long-term liabilities in the Statements of Net Position. In the current period, debt proceeds and related items were:
Bond anticipation notes proceeds (175,245)
Repayment of long-term debt is reported as an expenditure in the governmental funds, or as an other financing use in the case of refunding, but the repayment reduces the long-term liabilities in the Statements of Net Position. In the current year, the repayments consist of:
Debt service principal retirement 1 13,695
Some expenses reported in the Statements of Activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. These activities consist of:
Change in compensated absences-allocated to various departments 1,675
Change in claims and judgments 9,567
Change in bond interest 246
Change in bond anticipation notes interest (3.175)
Amortization of bond issuance/refunding costs (527)
Amortization of bond premium 13.426
Change in net pension liability (31,235)
Change in OPEB costs 6,681
Total additional expenses (3.342)
The proceeds from the sale of land and equipment are reported as revenue in the governmental funds. However, the cost ofthe land and equipment is removed from the capital assets account in the Statements of Net Position and offset against sale proceeds resulting in gain or (loss) in the Statements of Activities. The net effect of miscellaneous transactions involving capital asset sales:
Total land and equipment sales (261)
Unavailable tax revenues and certain other revenues that are earned but "unavailable" for the current period arc not recognized, in governmental funds. These revenues consist of
Property tax - net 36.832
Grant and rent adjustment|910|Total adjustments 36.835
Change in net position of governmental activities _S 76.484
78 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
3. Reconciliation of Budgetary Basis Accounting to GAAP Basis Accounting
The District prepares its budget in conformity with practices prescribed or permitted by the applicable statutes of the State of Illinois, which differ from GAAP. To reconcile the budgetary cash basis financials to the GAAP fund basis financials, the following schedule was prepared (in thousands of dollars):
General Corporate Fund
Revenues and other sources (uses) over (under) expenditures on a budgetary basis S 4,277
Adjustment from Budget to GAAP for:
Tax revenues (5,872)
Cash basis other revenues (7,732)
GAAP versus budgetary expenditure differences 1,279
Revenues and other sources (uses) over (under) expenditures on GAAP basis _S (8,048)
4. Deposits and Investments
Deposits
As of December 31, 2017, the District, the Pension Trust fund and OPEB Trust Fund deposits were fully insured and collateralized.
Investments (excluding Trust Funds)
The investments which the District may purchase are limited by Illinois law to the following: (1) securities which arc fully guaranteed by the U.S. Government as to principal and interest; (2) certain U.S. Government Agency securities; (3) certificates of deposit or time deposits of banks and savings and loan associations which are insured by a Federal corporation; (4) short-term discount obligations of the Federal National Mortgage Association; (5) certain short-term obligations of corporations (commercial paper) rated in the highest classifications by at least two ofthe major rating services; (6) fully collateralized repurchase agreements; (7) the Stale Treasurer's Illinois funds; (8) money market mutual funds and certain other instruments; and (9) municipal bonds of ihe State of Illinois, or of any other state, or of any political subdivisions thereof, whether interest is taxable or tax-exempt under federal law, rated within the four highest classifications by a major rating service. District policies require that repurchase agreements be collateralized only with dircctU.S. Treasury securities thai are maintained at a value of at least 102% ofthe investment amount (at market).
The following schedule reports the fair values and maturities (using the segmented time distribution method) for the District's investments al December 31, 2017 (in thousands of dollars):
Investment Maturities
Fair Less Than
Investment Type Value 1 Year I-5 Years
US Agencies S 192.689 S 123,098 S 69.591
Municipal Bunds 93,407 77,699 15.708
Commercial Paper 189.623 189,623 —
Stale Treasurer's Illinois Funds 10 10 —
Total Investments-- $ 475,729 S 390.430 S 85.299
The Illinois Funds invests a minimum of 75% of its assets in authorized investments of less than one year and no investment shall exceed two years maturity. The above fair value amount excludes accrued interest receivable of S747.000
FINANCIAL SECTION 79
Notes to the Basic Financial Statements
Year ended December 31. 2017 Interest Rate Risk
The District's investment policy protects against fair value losses resulting from rising interest rates by structuring its investments so that sufficient securities mature to meet cash requirements, thereby avoiding the need to sell securities on the open market prior to maturity, except when such a sale is required by state statute. In addition, the District's policy limits direct investments to securities maturing in five (5) years or less. Written notification is required to be made to the Board of Commissioners ofthe intent to invest in securities maturing more than five (5) years from the date of purchase.
Credit Risk
The District's investment policy applies the "prudent person'' standard in managing its investment portfolio. As such, investments arc made with such judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. The District's investment policy limits investments in commercial paper to the highest rating classifications, as established by at least two ofthe four major rating services, and which mature not later, than 270 days from the purchase date. Such purchases may not exceed 10% of the issuer corporation's outstanding obligations.
80 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
Credit ratings for the District's investments in debt securities as described by Standard & Poor's, Moody's and Fitch at December 31, 2017 (excluding investments in U.S. Treasuries, if any, which are not considered to have credit risk), are as follows:
Investment Type
U.S. Agencies
Federal Home Loan Banks (FHLB) Federal Home Loan Mortgage Corporation (FHLMC) Federal National Mortgage Association (FNMA) Total U.S. Agencies
Commercial Paper
State Treasurer's Illinois Funds
Illinois State Regional Transportation Authority *
Illinois State Sales Tax *
New York State Environmental Facilities Corporation * State of Illinois * State of Ohio *
Maryland State Housing and Community Development * California State Taxable High Speed Passenger Trains * Mississippi Development Bank, Jackson Public School District' Cook County, Illinois *
Atlanta Urban Residential Finance Authority *
Marin California Community College District 1 *
Waukegan, Illinois *
Honolulu Hawaii City and County *
New York State Urban Development Corporate *
Chicago Illinois Wastewater Transmission *
Rosemont, Illinois *
University of Illinois *
Houston Texas Utility System *
Holland, Michigan *
Credit Ratings at 12/31/2017 S&P/Moody's/Fitch
AA+/Aaa/NR AA+/Aaa/AAA AA+/Aaa/AAA
A-l/P-l/Fl AAAm/NR/NR AA/NR/AA AA-/NR/AA+ AAA/Aaa/AAA BBB-/Baa3/BBB AA+/Aal/AA+ NR/Aa2/AA AA-/Au3/AA-A/NR/NR AA-/A2/A+ NR/Aal/AA+ AAA/Aaa/NR
NR/A2/NR NR/Aal/AA+ AAA/Aal/AA+ A/NR/AA-AA/Baal/NR A-/A1/NR AA/Aa2/AA AA/NR/NR
% of investment Type
48.4% 46.4% 5.2% 100.0%
100.0% 100.0% 26.8% 12.8% 9.5% 7.5% 6.9% 5.8% 5.3% 4.5% 4.3% 3.8% 2.7% 2.5% 2.0% 1.6% 1.2% 1.1% 0.7% 0.6% 0.4%
% of Total Investments in Debt Securities
40.5%
40.0% 0.0% 5 2% 2.5% 1.9% 1.5% 1 4% 1.1% 1 1% 0.9% 0.8% 0.7% 0.5% 0.5% 0.4% 0.3% 0.2% 0.2% 0.1% 0.1% 0.1 % 100.0%
* Municipal Bond NR - Not Rated
Notes to the Basic Financial Statements
Year ended December 31, 2017
Concentration of Credit Risk
The District's goal is to limit the amount that can be invested in commercial paper to one-third ofthe District's total investments, and no more than 20% ofthe amount invested in commercial paper can be invested in any one entity. In 2017. the fair value of commercial paper represented 27.6% ofthe District's total investments, including certificates of deposit. None ofthe District's commercial paper in any one entity exceeded the 20% goal.
As of December 31, 2017, the following investments were greater than 5% of total investments (in thousands of dollars):
Investment Fair Value
Federal Home Loan Bank (FHLB) \ S 93,230
Federal Home Loan Mortgage Corporation (FHLMC) 89,473 Illinois State Regional Transportation Authority 24,968
1 207,671
There are no investments that represent 5% or more of the Pension Trust Fund's net position restricted for pension benefits identified.
There are no individual investments held by the OPEB Trust that represent 5% or more of the Trust's fiduciary net position or the investment portfolio at year-end.
Custodial Credit Risk
The District's investments are not exposed to custodial credit risk since its investment policy requires all investments and investment collateral lo be held in safekeeping by a third party custodial institution, as designated by the Treasurer, in the District's name. Custodial credit risk is the risk that, in the event ofthe failure ofthe counterparty, the District will not be able to recover the value of its investments or collateral securities which are in the possession ofthe outside party.
As of December 31,2017, the Pension Trust Fund had minimal exposure to custodial credit risk since all investments were insured, registered, and/or held in the Fund's name.
The OPEB Trust's Investment Policy requires that all investments and investment collateral beheld in safekeeping by a third party custodial institution, as designated by the Treasurer, in the Trust's name. All cash balances maintained at banks arc required to be collateralized with permitted U.S. Government Securities in an amount equal to 105% (at market) ofthe monies on deposit. Cash awaiting reinvestment in the Trust's investment account is protected up to $250,000 under coverage by the Securities Investor Protection Corporation (SIPC). As of December 31, 2017, the Trust had no exposure to custodial credit risk since all investments were registered or held in the Trust's name.
Trust Fund Investments
The Pension Trust Fund uses the "prudent person rule" as the Fund's investment authority as set forth in the Illinois Compiled Statutes. The Fund's asset allocation policy allows investments in domestic equities, international equities and fixed income securities.
The OPEB Trust Fund is authorized under State Statute 70 ILCS 2605/9.6(d). In accordance with the Statute, the Trust Fund shall be managed by the District Treasurer in any manner deemed appropriate subject only to the prudent person standard. The Trust adopted its investment policy on November 19. 2009, and revised it on December 19. 2013. Investments shall be limited to publicly traded securities and mutual funds, adequately diversified among various market segments and sectors as well as other developed countries and emerging markets.
82 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
At December 31, 2017, the OPEB Trust's assets were invested in mutual funds traded on national securities exchanges. Investments are stated at fair value. The fair value of mutual fund units traded on national securities exchanges is the last reported sales price on the last business day ofthe fiscal year ofthe Trust. Purchases and sales of mutual fund units are accounted for on the trade dates.
Interest Rate Risk
Interest rate risk is defined as the risk that the fair value of an investment will be adversely affected by changes in market interest rates. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates becomes. One strategy to manage exposure to interest rate risk is lo purchase a combination of short-term and long-term investments, while considering cash flow needs of the Pension Trust Fund. The Pension Trust Fund does not maintain an investment policy relative to interest rate risk; however, the Board of Trustees recognizes that its investments are subject to short-term volatility and their goal is to maximize total return within prudent risk parameters.
The following table categorizes the Pension Trust Fund's interest bearing investments and presents the fair value and segmented time distribution of debt securities held by the Pension Trust Fund as of December 31, 2017 (in thousands of dollars):
Investment Maturities (In Years) Less than
Investment Type Fair Value 1 Year 1-5 Years 6-10 Years 10+Years
Fixed Income:
Pooled Funds - Long Term investments S 184,200 $ — $ —SI 84,200 S —
Pooled Funds - Short Term investments 30,689 30,689 — — —
Corporate bonds and notes 66,134 474 33,518 18,511 13,631
Municipal bonds 3,494 3,494 —
Common collective trust 8,875 226 2,888 5,048 713
U.S. Governmental and government agency
obligations " " 93,190 9,710 14,524 7,484 61,472
Non-U.S. Government obligations 50,015 1,071 21,514 12,022 15.408
Mortgage backed 6,506 75 — — 6,431
Asset backed 21,598 63 11,139 1.397 8.999
Total Fixed Income 464,701
Equities:
Common Stock 576,588 Mutual and Co-mingled Equity 342,484
Total Equities 919.072
Total Investments S 1.383,773
The Fund's benefit liabilities extend many years into the future; therefore, the Pension Trust Fund's policy is to maintain a long-term focus on its investment decision-making process. The Fund's fixed income performance objective is the Barclays Capital Aggregate Bond Index.
The OPEB Trust's benefit liabilities extend many years into the future, and the Trust's policy is to maintain a long-term focus on its investment decision-making process. Fixed income investments susceptible to interest rate risk are monitored to prevent such investments from exceeding established allocation targets.
FINANCIAL SECTION 83
Notes to the Basic Financial Statements
Year ended-December 31. 2017
The following illustrates the terms of investments that are highly sensitive to interest rale fluctuations and reports the fair values and maturities for the OPEB Trust Fund's investments at December 31, 2017 (in thousands of , dollars):
Investment Type
Domestic Fixed Income Funds Dodge & Cox Income Fund Payden Core Bond Fund Western Asset Core Plus Institutional Total Domestic Fixed Income Funds Domestic Equity Funds
Fidelity 500 Index Institutional Class Fidelity Contrafund Fidelity Mid Cap Index Institutional LSV Value Equity Institutional Vanguard Small Cap Index Institutional Total Domestic Equity Funds International Equity Funds
Fidelity International Index Institutional Total International Equity Funds Global Balanced Funds
PIMCO All Asset Institutional Class Money Market Funds
Total Fair Value
44.0% 12.1% 43.9%
Fair Value Percentage
27,665 7,609 27,531
62,805
17,760 17,671
7,680 17,639
8,076
68,826
29,067
29,067
17,449
16,994
195,141
Weighted Average
Maturities (Years)
7.5 8.3 12.7
Credit Risk
Credit risk is defined as the risk that the issuer of a debt security will not pay its par value upon maturity. The Illinois Statutes prescribe the "prudent person rule" as Ihe Pension Trust Fund's investment authority and within the "prudent person" framework, the Board of Trustees adopts investment guidelines that consider credit risk for the Pension Trust Fund's investment managers which arc included within their respective investment Management Agreements.
84 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
The following table presents a summarization of the Pension Trust Fund's credit quality ratings ofthe holdings within the investments at December 31, 2017 (in thousands of dollars):
Disclosure Ratings for Debt Securities (1) (As a percentage of total fair value for debt securities)
Credit Rating
Aaa Not Rated AI-A3 Aal-Aa3
Aaa Bal-Ba3 Baal-Baa3 Not Rated
AI-A3 Aal-Aa3
Aaa Not Rated
A1-A3 Aal-Aa3 Aaa BI-B3 Bal-Ba3 Baal-Baa3 Caal-Caa3 Not Rated
AI-A3 Aal-Aa3 Aaa 131-B3 Bal-Ba3 Baal-Baa3 Caal-Caa3 Not Rated
BB-A Aa Aaa Baa Not Rated
Not Rated
Investment Type
U.S. Governmental and Government Agency Municipal
Non-U.S. Governmental Non-U.S. Governmental Non-U.S. Governmental Non-U.S. Governmental Non-U.S. Governmental Non-U.S. Governmental
Mortgage backed Mortgage backed Mortgage backed Mortgage backed
Asset backed Asset backed Asset backed Asset backed Asset backed Asset backed Asset backed Asset backed
Bonds and Notes Bonds and Notes Bonds and Notes Bonds and Notes Bonds and Notes Bonds and Notes Bonds and Notes Bonds and Notes
Common collective trust-fixed income (3) Pooled funds - long term investments Pooled funds - long term investments Pooled funds - long term investments Pooled funds - long term investments Pooled funds - long term investments
Pooled funds - short term investments
Fair Value
t 93,190 3,494 1,538 2,836 2,053 239 671 42,678 50,015 (2)
58 337 4,212 1,899
6,506
2,391 2,931 2,906
429 1,026 1,784
528 9,603
21,598
12,539 2,919 6,054 7,568 2,288 9,310 922
24,534
66,134
8,875
20,870 6,926 131,298 25,069
37_
184,200 30,689 S 464,701
/«
20.1%
0.8
0.3 0.6 0.4 0.1 0.1 9.2
10.7
0.0 0.1 0.9 0.4
1.4
0.5 0.6 0.6 0.1 0.2 0.4 0.1 2.1
4.6
2.7 0.6 1.3 1.6 0.5 2.0 0.2 5.3
14.2
1.9
4.5 1.5 28.3 5 4 0.0
39.7
6.6
100.0%
Report details the percentage of fixed-income securities that fall within each credit-quality rating as assigned by Moody 's credit rating agency.
Includes foreign currency-denominated investments.
Average credit quality rating is provided by Bank of America Merrill Lynch.
FINANCIAL SECTION 85
Notes to the Basic Financial Statements
Year ended December 31.2017
The OPED Trust's Investment Policy requires a minimum of 85% ofthe fixed income holdings of an actively managed fixed income mutual fund he of investment grade quality or higher at purchase; rated no lower than "Baa" by Moody's and no lower than "BBB" by Standard and Poor's. The Trustee, at its discretion, may impose a higher standard on an individual investment's circumstances or as investment objectives dictate. Fixed income purchases shall be limited to obligations issued or guaranteed as to principal and interest by the U.S. Government, Canadian Government, or any agency or instrumentality thereof, or to corporate and municipal issues.
The following are the percentages of fixed income investment portfolio securities within each credit-quality rating as of December 31, 2017:
Disclosure Ratings for Debt Securities (As a percentage of total fair value for debt securities)
Dodge & Cox Payden Core Western Asset
Credit Rating Income Fund Bond Fund Core Plus Fund
AAA 57.4% 52.0% 54.9%
AA 3.7 1.0 2.9
A 3.9 8.0 14.5
BBB 28.1 35.0 11.8
BB 5.5 0.0 7.9
B 0.0 0.0 3.4
Below B 1.4 1.0 3.6
Not Rated OX) 3_0 1.0
Total 100.0% 100.0% 100.0%
Morningslar Inc. provided the percentage of fixed-income securities that fall within each credit-quality rating as assigned by Standard & Poor's or Moody's credit rating agencies.
The Trust's investment in a money market fund was not individually rated by a nationally recognized statistical rating organization.
86 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
Foreign Currency Risk
Foreign currency risk is ihe risk of loss arising From changes in currency exchange rales. All foreign currency denominated investments are in equities, fixed income and foreign cash. The Pension Trust Fund's exposure to foreign currency risk at December 31, 2017 was as follows:
Common Stock
Australian Dollar Canadian Dollar Swiss Franc Danish Krone F.uro
Pound Sterling Hong Kong Dollar Israeli Shekel Japanese Yen Norwegian Krone New Zealand Dollar Swedish Krona Singapore Dollar Total
Fair Value
1 9.791,274 5,020,142 8,574,716 2,701,260 35,713,200 25,152,695 3,435,414 613,478 38,118,324 2,055,159 1.707.061 5,490,183 3,424.500 S 141.797,406
%
6.9 3.5 6.0 1.9 25.3 17.7 2.4 0.4 27.0 1.4 1.2 3.9 2.4
100.0
Corporate Bonds and Notes
Argentina Peso Australian Dollar Canadian Dollar Chilean Peso Euro
Pound Sterling Israeli Shekel Indian Rupee Japanese Yen Mexican Peso Norwegian Krone New Zealand Dollar Russian Ruble Swedish Krona Thailand Bahl Turkish Lira Uruguayan Peso South African Rand Tola I
Fair Value
1 1,936,511 1.342.096 2.635.529 490.187 9,243,317 2.847,927 . 127,978 159.325 19,403,995 1,287,871 4.259 3,881,744 1.014.336 1.115,479 240,052 875,180 512,334 2.468,892 S 49,587,012
% 3.9 2.7 5.3 . 1.0 18.6 5.7 0.3 0.3 39.2 2.7
7.8 2.0 2.2 0.5 1.8 1.0 5.0 100.0 %
FINANCIAL SECTION 87
Notes to the Basic Financial Statements
Year ended December 31, 2017
Foreign Cash
Argentina Peso Australian Dollar Canadian Dollar Swiss Franc Danish Krone Euro
Pound Sterling Hong Kong Dollar Israeli Shekel Japanese Yen Mexican New Peso Norwegian Krone New Zealand Dollar Polish Zloty Russian Ruble Swedish Krona Singapore Dollar Thailand Baht Turkish Lira South African Rand Total
Fair Value
32,768 185,970 149.912 77,457 84,421 270,584 91,844 188,059 129,921 263,174 50,908 57,450 28,875 29,930 37,797 37,317 27,180 2,602 9,764 64,017 1,819,950
/O
1.8
10.2 8.2 4.3 4.6
15.0 5.0
10.3 7.1
14.5 2.8 3.2 1.6 1.6 2.1 2.1 1.5 0.1 0.5 3.5
100.0 %
The OPEB Trust Fund's policy is to disclose any investment denomination in a foreign currency. Exposure to foreign currency risk is limited to the international investment allocation target maximum of 20% ofthe fair value of the investment portfolio.
As of December 31,2017, the OPEB Trust investments in international equity mutual funds stated at fair market value arc as follows (in thousands of dollars):
Fund Name
Fidelity International Index Institutional $ 29.067
Securities Lending
The Pension Trust Fund lends its secunties.to broker-dealers and other entities with a simultaneous agreement to return the collateral for the same securities in the future. The Bank of New York Mellon, the Fund's master custodian, lends for collateral in the form of cash, irrevocable letters of credit or other securities worth at least 102% ofthe lent securities' market value, and international securities for collateral worth at least 105%. The contract with the Fund's master custodian requires it to indemnify the Fund if the borrowers fail to return the securities (and if the collateral is inadequate to replace the securities lent) or fail to pay the Fund for income distributions by the securities issuers while the securities are out on loan.
All securities loans can be terminated on demand by either the Pension Trust Fund or the borrower, although the average term ofthe loans is one week. Cash collateral is invested in the lending agent's short-term investment pool, which at year-end has a weighted average maturity of 3 days.
The relationship between the maturities ofthe investment pool and the Pension Trust Fund's loans is affected by the maturities ofthe securities loans made by other entities that use the agent's pool, which the Fund cannot
88 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
determine. The Pension Trust Fund cannot pledge or sell collateral securities without borrower default; as such, the collateral security or non-cash collateral is not reported in the financial statements.
Although the Fund's securities lending activities are collateralized as described above, they involve both market and credit risk. In this context, market risk refers to the possibility that the borrower of securities will be unable to collateralize the loan upon a sudden material change in the fair value ofthe loaned securities or the collateral. Credit risk refers to the possibility that counterparties involved in the securities lending program may fail to perform in accordance with the terms of their contracts.
Indemnification deals with the situation in which a client's securities are not returned due to the insolvency of a borrower. The contract with the lending agent requires it to indemnify the Fund if borrowers fail to return the securities or fail to pay the Fund for income distributions by the issuers of securities while the securities are on loan.
A summary of securities loaned at fair value as of December 31, 2017 is as follows:
Fair value of securities loaned for cash collateral $ 26,675,638
Fair value of securities loaned for non-cash collateral 32,031,506
Total fair value of securities loaned $ 58,707,144
Fair value of cash collateral from borrowers $ 27,447,849
Fair value of non-cash collateral from borrowers 32,788,709
Total fair value of collateral $ 60,236,558
The value ofthe cash collateral held and a corresponding liability to return the collateral have been reported in the accompanying statement of fiduciary net position.
The fund also participates in the securities lending programs offered by State Street Global Advisors (SSGA) with regards to their commingled index funds. Securities lending income earned by SSGA serves as a credit to quarterly management fees, and any remainder is used for purchasing additional units in the bond index fund.
Fair Market Value Measurements
The District, the Pension Trust Fund and the OPEB Trust Fund have adopted GASB Statement No. 72, Fair Value Measurement and Application, which provides guidance for determining a fair value measurement for reporting purposes and applying fair value to certain investments and disclosures related to all fair value measurements.
The District and its fiduciary funds categorize its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation input used to measure the fair value ofthe asset.
Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for
identical assets. Includes common stock, mutual and commingled equity funds, and U.S.
Government and government agency obligations and Non-U.S. Government obligations that are
/ traded in active markets and are valued at closing prices on the measurement date.
Level 2 Quoted prices for similar assets or liabilities in active markets, inactive markets, or using other significant inputs which arc observable cither directly or indirectly. Includes U.S. Government and government agency obligations, non-U.S. Government obligations, mortgage backed securities, asset backed securities, and corporate bonds and notes that are generally valued by benchmarking model-derived prices to quoted market prices and trade data for identical or
FINANCIAL SECTION 89
Notes to the Basic Financial Statements
Year ended December 31, 2017
comparable securities. To the extent that quoted prices are not available, fair value is determined based on a valuation model that includes inputs such as interest rates and yield curves at commonly quoted intervals, implied volatilities and credit spreads, or market corroborated inputs.
Prices or valuations that require inputs that are both significant to the fair value measurement and arc unobservable. Includes corporate bonds and notes that are valued using a discounted cash flow technique or consensus pricing.
The carrying amount of investments and fair value hierarchy at December 31, 2017 is shown in the following schedule (in thousands of dollars):
Fair Value Measurements Using
Investments Measured at Fair Value Debt Securities
U.S. Agencies Municipal Bonds Commercial Paper
Total Investments at Fair Value
Quoted Prices in Active Markets for Identical Assets (Level 1)
12/31/2017
S 192,689 $
93,407
189,623
S 475,719 $
Significant Other Observable Inputs (Level 2)
192,689 93,407 189,623
475,719 $
Investments Not Measured at Fair Value
State Treasurer's Illinois Funds Total Investments
The District docs not have Level 1 investments. Debt securities classified in Level 2 are valued using a matrix pricing technique. Matrix pricing is used to value securities based on the securities' relationship to benchmark quoted prices. The District docs not have Level 3 investments.
90 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
The Retirement fund categorizes its lair value measurements within the fair value hierarchy established by generally accepted accounting principles. The following table sets forth, by level, within the fair value hierarchy, the investments at fair value as of December 31. 2017:
Fair Value Measurements Using
Investments Measured at Fair Value 12/31/2017
Debt Securities
U.S. govt and govt agency obligations S 93,190
Municipal bonds 3,494
Non-U S. government obligations 50,015
Mortgage-backed 6,506
Asset-backed 21,598
Corporate bonds and notes 66,134
Total debt securities 240.937
Kquity Securities
Common stock 576,588
Mutual/commingled equity funds 260,976
Total equity securities 837.564
Fixed Income - Pooled Funds
Short term 30.689
Long term 184.200
Total fixed income - pooled funds 214,889
Total investments at fair value $ 1,293,390
Investments measured at NAV 90,383
Total investments at fair value $ 1,383.773
Significant Other Observable Inputs (Level 2)
30,408 S
62,782 3,494
50,015 6,506
21,598
66,134
210,529
30,689 184,200
214,889
425.418 $
Investment derivative instruments
Foreign currency options (liabilities)
Futures contracts (liabilities)
Total investment derivative instruments
(28) $ (37)
(65) S
(37) (37)
Investments measured at NAV Fair Value
Fixed income
Common Collective Trust (1) S 8.875
Mutual & commingled equity funds
Commingled funds non-US equity (2) 81,508
Total investments measured al NAV $ 90,383
Redemption
Frequency
(If Currently Redemption
Eligible) Notice Period
Monlhlv
— 2 times monthly
(1) Common Collective Trust - The fund's investment objective is to achieve an attractive total return of income and capital appreciation by investing primarily in high yield fixed income securities and bank loan interests, including secured and unsecured bank loans. The fair value ofthe investment in the fund has been determined using the NAV per share of the investment.
FINANCIAL SECTION 91
Notes to the Basic Financial Statements
Year ended December 31.2017
(2) Commingled Funds non-U.S. Equity -The fund's investment objective is to approximate as closely as practicable the performance of the MSCI ACWI ex USA Index over the long term by investing in other collective investment funds which have characteristics consistent with the fund's overall investment objective. The fair value ofthe investment in the fund has been determined using the NAV per share of the investment.
The carrying amount of investments and fair value hierarchy ofthe OPEB Trust is shown in the following schedule asofDecember31,20T7:
Fair Value Measurements Using
Fair Value of Investments
Domestic Equity Funds International Equity Funds Domestic Fixed Income Funds Global Balanced Funds Money Market Funds
Total Fair Value of Investments
68,826 29,067 62,805 17,449 16,994
Quoted Prices in Active Markets for Identical Assets (Level 1)
S 68,826
29,067
62,805
17,449
16,994
195,141 $
Significant Unobservable Inputs (Level 3)
Investments classified in Level I ofthe fair value hierarchy arc valued using prices quoted in active markets for those securities. The Trust docs not have Level 2 or Level 3 investments.
5. Receivables, Deferred Inflows of Resources and Payables
Certain receivables and payables reported in the financial statements represent aggregations of different components, such as balances due from/to taxpayers, users, other governments, vendors, and employees. The following information is provided to detail significant balances which make up the components.
Receivables
Receivables as of December 31. 2017 in the District's governmental funds and government-wide financial statements, net of uncollectible accounts, are detailed as follows (in thousands of dollars):
Receivables al December 31,2017 Property taxes:
Allowance for uncollectible taxes Net property taxes Personal properly replacement lax
Total taxes receivable, net Other receivables. User charges
Slate revolving fund loans
Miscellaneous
total other receivables, net
Tolal net receivables al Deeemhei 31. 2017
Total Governmental
Statement of Net Position
Other Governmental
Debt Service
Retirement
S 74.752 (3.883) 70,869 4.173
Capital Improvements Kond
S 237.272 (12,694) 224,578
58.095 (2,967) 55,128
604.651 (32.274) 572,377 4,173
7d.550
224.578
75.042
55,128
2,7X2 41,619 7.441
S 604,651 (32.274) 572.377 4.173 576.550
41,619 878 42.407
746
2,782 41.619 7.441
7-16
.842
5.X 17
51.842
S 230.401 S 224,578 S 42.497 S 75.042 S 55,874 $ 02X.392 $ 628.392
92 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
The property tax receivable includes a nominal amount that is not expected to be collected within one year ofthe financial statement date.
Deferred Inflows of Resources
Unavailable tax revenue is reported in the Governmental Funds Balance Sheets in connection with receivables for property taxes that are not considered to be available to liquidate liabilities ofthe current period. Other unavailable revenue is reported in the Governmental Funds Balance Sheets and the government-wide Statements ofNet Position for rental resources that have been received, but not earned. Other unavailable revenue is reported in the Governmental Funds Balance Sheets for the federal subsidy accrual relating to the direct reimbursement for the District's Build America Bonds. A summary of unavailable revenue as of December 31, 2017 is as follows (in thousands of dollars):
Capital
Improve- Other Total Statement
General Debt ments Govern- Govern- Adjust- of Met
Corporate Service Bond Retirement mental mental ments Position
Deferred inflows of resources at December 31,2017:
Property tax revenue $ 185,230 $187,542 $ — $ 59.174 $ 46.028 S 477,980 S (477,980) S
Other amounts:
Grant revenue — — 944 — — 944 (944)
Total deferred revenue at
December 31,2017 S 185,236 $ 187,542 S 944 $ 59,174 $ 46,028 $ 478.924 $ (463,822) S 15,102
Payables
Payables reported as "Accounts payable and other liabilities" at December 31, 2017 in the District's governmental funds and government-wide financial statements are detailed as follows (in thousands of dollars):
Capital
Improve Oilier Total Statement
General Debt ments Govern Govern of Net
Corporate Service Bond Retirement mental mental Position
Accounts payable and other liabilities at
Deeember3l. 2017-
Vouehers payable and other liabilities S 17.222 $ — $ 55,356 $ — S 4,886 $.77,464 $ 77,464
Acenicd payroll and withholdings 3.964 — — — — 3.964 3,964
Bid deposits 738 — — — — 738 738
Unearned revenue X.I39 — — — — 8,139 8,139
Total accounts payable and olher
liabilities as of December 31,2017 S 30.063 S — S 55.356 S — $ 4.886 S 90.305 S 90,305
FINANCIAL SECTION 93
Notes to the Basic Financial Statements
Year ended December 31, 2017
6. Capital Assets
A summary ofthe changes in capital assets for the year ended December 31, 2017, are as follows (in thousands of dollars):
Balances January 1,2017
Balances December 31, 2017
Governmental activities.
Capital assets not depreciated/amortized: Land
Permanent easements
Construction in progress
Infrastructure under modified approach Total capital assels not depreciated/amortized Capital assets depreciated/amortized:
Buildings
Equipment
Computer software
Infrastructure and easements Total capital assets being depreciated/amortized Less accumulated depreciation/amortization:
Buildings
Equipment
Computer software
Infrastructure and easements Total accumulated depreciation/amortization Total capital assets depreciated/amortized, net Governmental activities capital assets, net
142,880 1,463
541,199 5,045,360 5,730,902
13,226 60,886 6,141 1,898.573
1,978,826
6.057 35,647 5,284 235.X06
282.794
1.696,032
7.426,934 S
1,324 S
190,907 41,873
234,104
2,147 1.342
3,489
185 2,943 750 11.313
15,191
(11.702)
222,402 $
53,164 1,467
54,631
1,376
1,376
1.113
1,113
263
54,894 $
144,204 1,463 678,942 5,085,766
5,910,375
13,226 61,657 7,483 1,898.573
1,980,939
6.242 37.477 6,034 247.119
296,872
1,684.067
7,594,442
Depreciation and amortization expense in the government-wide Statements of Activities, for the year ended December 31, 2017, was charged to the District's governmental functions as follows (in thousands of dollars):
Department
Board of Commissioners
General Administration
Monitoring and Research
Procurement and Materials Management
Human Resources
Information Technology
Law
Ft nance
Engineering
Maintenance and Operations Total allocated depreciation
Unallocated infrastructure depreciation Total depreciation
Amount
1 iT
119 270 13 21
95 12 9
1,824 753 3,128 12,063 S 15,191
94 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
7. Pension Plan Plan Description
The Metropolitan Water Reclamation District Retirement Fund (Pension Trust Fund) is the administrator of a single employer defined benefit pension plan (Plan) in accordance with 40 ILCS 5 ofthe Illinois Compiled Statutes. Article 13 ofthe Illinois Pension code grants the authority to establish the defined benefits ofthe Plan, as well as the employer and employee contribution levels ofthe Plan and may be amended only by the Illinois Legislature. The District contribution is currently calculated in accordance with stale statute as to the amount sufficient to meel the Fund's actuarially determined contribution requirement, but not to exceed an amount equal to 4.19 times the employee contributions two years prior. For the year ended December 31,2017, the District's average contribution rate was 40% of annual payroll. The District's actual contribution to the Retirement Fund was $89,858,000.
The Pension Trust Fund issues a financial report that includes financial statements and required supplementary information establishing the financial position of the Plan. That report may be obtained by writing to the Metropolitan Water Reclamation District Retirement Fund, 111 E. Erie, Chicago, IL, 60611-2898 or electronically on their website: www. mwrdrf.org .
The Pension Trust Fund provides retirement, death, and disability benefits to plan members and beneficiaries. Pension legislation (Public Act 96-0889) was approved in 2010 and established two tiers of members with different eligibility conditions and benefit provisions:
Tier 1 - Employees hired before January 1, 2011 are required to contribute 12% of their salary to the Fund. Tier 2 - Employees hired on or after January 1,2011 are required lo contribute 9% of their salary to the Fund.
The District is required to contribute the remaining amounts necessary to finance the requirements ofthe Plan on an actuarially funded basis.
Retirement Eligibility and Benefits
All full time employees ofthe District are eligible to participate in the retirement plan.
Tier 1 employees must have at least live years of service at age 60 and include service of 120 days or more per year to receive an undiscountcd retirement benefit. Employees in this tier who reach age 55 (or 50 if hired on or before June 13, 1997) with at least ten years of service are entitled to receive a minimum retirement benefit; however, if the employee is less than age 60 or service less than 30 years, the normal retirement benefit is reduced by .5% for each full month the member is less than age 60 or service is less than 30 years, whichever is less. Upon withdrawal from service a Tier I employee age 55 or under (50 if hired on or before June 13, 1997) and less than age 60 with less than 20 years of service, or age 60 or over with less than 5 years of service, is eligible for a refund of accumulated employee contributions, without interest, upon request. The retirement benefit is calculated as 2.2% ofthe final average salary for each ofthe first 20 years of service and 2.4% for each year of service in excess of 20 years. The benefit shall not exceed 80% of final average salary. Tier 1 employees receive a 3% cost of living adjustment annually.
Tier 2 employees must have at least 10 years of service at age 67 to be eligible lo receive an undiscountcd retirement benefit. Employees in this tier who reach age 62 with at least ten years of service arc entitled to receive a minimum retirement benefit; however, if the employee is less than age 67. the normal retirement benefit is reduced by .5% for each full month the member is less than age 67. A Tier 2 employee is eligible for a refund of accumulated employee contributions without interest if under age 62 regardless of service, or if less than 10 years of service regardless of age on withdrawal. Ihe retirement benefit is calculated as 2.2% ofthe final average salary for each ofthe first 20 years of service and 2.4% for each year ol service in excess of 20 years. The benefit shall not exceed 80% of final average salary. Pensionable salary is limited to$l 12.408 in 201 7 for Tier 2 employees. Tier 2 employees
FINANCIAL SECTION 95
Notes to the Basic Financial Statements
Year ended December 31, 2017
receive a cost of living adjustment as the lesser of 3% and halfof the CPI-u for the 12 months ending the September 30th prior to the increase date.
If a covered employee leaves employment before the age of 55, accumulated employee contributions are refundable without interest. Upon receipt of a refund, the employee forfeits rights to benefits from the fund.
There are two other types of annuities available to family members ofthe plan: Surviving Spouse Annuity and Children's Annuity. The spouses of employees hired before June 13, 1997 arc immediately eligible to receive a surviving spouse annuity; spouses of employees hired on or after June 13, 1997 are eligible after three years of member's service. For all Tier 1 employees hired before January I, 2011, the surviving spouse annuity is equal to 60% ofthe employee's retirement benefit at the time of death plus 1 % for each year of total service to a maximum of 85%. For Tier 2 employees, an eligible surviving spouse will be entitled to an annuity equal to 66 2/3% of the employee's retirement benefit at time of death. Each unmarried child, until the age of 18 (23 if full time student) of an employee that dies in service or of a former member that dies with at least ten years of service, is eligible for a monthly annuity of $500 per month (if one parent is living) and S1,000 per month (if neither parent is living) to a maximum total benefit of $5,000 per month.
Employees covered
At December 31, 2017, the following employees were covered by the benefit terms:
Inactive Employees
Employees or beneficiaries currently receiving benefits
Entitled but not yet receiving benefits Active Employees Total Members
2,408 137 1.835 4.380
Basis of Accounting
The Pension Plan's financial statements are prepared using the accrual basis of accounting. For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position the Pension Plan and additions to/ deductions from the Pension Plan's fiduciary net position have been determined on the same basis as they are reported by the Pension Plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Detailed information about the pension plan's fiduciary net position is available in the separately issued Retirement Fund financial report. Page 95 has the information for obtaining those statements.
Metropolitan Water Reclamation District of Greater Chicago
Net Pension Liability and the Changes in the Net Pension Liability
The District's measurement date for GASB 68 is December 31, 2016. The Pension Plan has a measurement date of December 31,2017. A copy ofthe Pension Plan CAFR for 2017 may be obtained by accessing the Metropolitan Water Reclamation District Retirement Fund's website at www.mwrdrf.org . The net pension liability at December 31, 2017 is $1,079,566,000, which is an increase from the December 31, 2016 balance of S1,073,113,000.
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability
Balances at beginning of year S (2,359,766) S 1,286,653 $ (1,073,113)
Service Cost (32,058) — (32,058)
Interest (173,861) — (173,861)
Difference between expected and actual experiences (13,814) — (13,814)
Benefit payments 147,336 (147,336) —
Contributions-employer — 80,259 80,259
Contributions-employee — 20,831 20,831
Net investment income — 113,586 113,586
Administrative expenses — (1,503) (1,503)
Other — 107 107
Balances at end of year S (2.432,163) S 1,352,597 $ (1,079,566)
Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions
At December 31, 2017, the District reported deferred outflows of resources and deferred inflows of resources related to pensions. Employer contributions made subsequent to the measurement date in the amount of $89,858,000, will be recognized as a reduction of the net pension liability in the year ended December 31, 2018. Differences between expected and actual experience, changes in assumptions and net di (Terences between projected and actual experiences amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows (in thousands of dollars):
Balance as of December 31, 2016
Changes in Employer contribution subsequent to measurement date
Differences between expected and actual experience Changes in assumptions
Net difference between projected and actual earnings on pension plan investments
Deferred Outflows of Resources
~$ 187,959 ~$~
9,599 7,298
(22,820)
182,036
FINANCIAL SECTION 97
Notes to the Basic Financial Statements
Year ended December 31, 2017
Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows (in thousands of dollars):
Year ended December 31:
201S $ 115,419
. 25,561
22,720
931
2,303
$ 166,934
Actuarial Methods and Assumptions
The District's net pension liability was measured as of December 31, 2016, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of December 31, 2016. The District chose to use a measurement date one year in arrears. The total pension liability in the December 31,2016 actuarial valuation was determined using the Entry Age Normal actuarial cost method and using the following actuarial assumptions, applied to all periods included in the measurement:
Inflation Salary Increases Investment Rate of Return Cost of living adjustment
2.5%
Varies by service
7.50%. net of investment expense, including inflation Tier 1: 3%
Tier 2:' the lesser of 3% and half of the CPI-u for the 12 months ending the September 30th prior to the increase date
Surviving spouse annuitants: 1.25%
Mortality rates were based on the RP-2000 Combined Healthy Mortality Tables with generational mortality improvements based on Scale AA. Pre-retirement mortality rates are the same as post-retirement rates.
The actuarial assumptions used in the December 31, 2015 valuation were based on the results of an actuarial experience study for a five year period ending December 31, 2013.
Investment Allocation and Rate of Return
The long-term expected rate of return on pension plan investments was determined using a building-block method which best estimates ranges of expected future real rates of return. These ranges are combined to produce the long term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The Pension Board's adopted target asset allocation and best estimates of real rates of return for each major asset class are summarized in the following table:
Expected
Asset Class Target Allocation Real Rate of Return
Domestic Equity 42% 5%
International Equity 23%' 5.1%
Bonds 35% 0.4%
The discount rate used to measure the total pension liability was 7.5%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that sponsor contributions will be made at rales equal to the difference between actuarially determined contribution rates and the member rale. Based on those assumptions, the pension plan's fiduciary net position was
98 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
projected to be available to make all projected future benefit payments of current plan members; therefore, the long term expected rate of return of 7.5% was applied to all periods of projected benefit payments to determine the pension liability.
A sensitivity analysis is also completed lo show the effect on the net pension liability if the discount rale was plus or minus one percentage point from the current rate (in thousands of dollars):
I % Decrease Current Discount 1% Increase
6.5% Rate of 7.5% 8.5%
Net Pension Liability ~$ 1,361,929 $ 1,079,566 $ 841,925
Payable to the Pension Plan and Pension Expense
At December 31, 2017, the District reported a payable of $89,858^000 for the outstanding amount of contributions to the pension plan required for the year ended December 31, 2017. The pension expense for the year ended December 31, 2017 was $117,336,000.
8. OPEB - Other Post-Employment Benefits Plan Description
The Metropolitan Water Reclamation District Retiree Health Care Trust (OPEB Trust) administers the financing and payment of other post employment benefits for the Metropolitan Water Reclamation District of Greater Chicago. Pursuant to Illinois Statute 70 ILCS 2605/9.6(d), the District adopted the Metropolitan Water Reclamation District Retiree Health Care Plan (Plan) effective December 6, 2007. The purpose ofthe Plan is to provide postretirement medical and prescription drug coverage benefits to retirees as well as spouses and dependents of retirees that fulfill certain eligibility requirements. Retirees and annuitants receiving a pension through the Pension Trust fund are eligible for District sponsored health insurance. As of December 31,2017, there are 2,797 retirees and beneficiaries currently receiving health care coverage.
The OPEB Trust Fund issues a financial report that includes financial statements and required supplementary information establishing the financial position of the Plan. That report may be obtained by writing to the Metropolitan Water Reclamation District Retiree Health Care Trust Fund, 100 E. Erie, Chicago, IL, 60611-2898 or electronically on the District's website: www.mwrd.org .
Basis of Accounting
The financial statements ofthe Trust are prepared using the accrual basis of accounting. Employer contributions to the Trust are recognized when due and the employer has made a formal commitment to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms ofthe Plan.
Contributions
The District has not entered into any long-term contracts for contributions to the plan as ofthe date of this report. State Statute 70 ILCS 2605/9.6d is the legislation establishing the Trust and gives the District Boanl of Commissioners discretionary authority to determine contribution amounts to be paid by the District. The OPEB Funding Policy includes a target funded ratio of 100% with an expected funding period of 12 years (beginning in 2015). In 201 7, $5,000,000 was contributed by the District to the OPEB Trust Fund bringing the total contributed through December 31, 2017 to $127,400,000. In succeeding fiscal years, the Trust will receive the District (employer) contribution as determined by the Board of Commissioners. There is currently no requirement for the District to partially or fully fund the Trust, and any funding is on a voluntary basis. Plan participants do not contribute to the plan other than providing premium contributions as discussed below.
FINANCIAL SECTION 99
Notes to the Basic Financial Statements
Year ended December 31, 2017
The District allows employees who retire and meet certain eligibility requirements to continue medical coverage as participants in the Metropolitan Water Reclamation District Retiree Health Care Plan. The plan allows for subsidized health care benefits for its retirees. Retirees contribute 39.0% ofthe premium and the District pays the remaining 61.0%. Each year for the next five years, retiree contributions will rise by 2.5% until the premium reaches 50%. Annually, the Board approves an appropriation to fund retiree medical costs as part ofthe Human Resources Department. General Corporate Fund budget. The amount of OPEB expenditure recognized during 2017 by the District was $18,430,657, all claims paid (net of participant contributions).
Annual OPEB Cost and Net OPEB Obligation
The following OPEB cost and net OPEB obligation was determined for the year ended December 31, 2017 (in thousands of dollars).
Annual Required Contribution for 2017 S 11,507
Interest on Net OPEB Obligation 1,170
Adjustment to Annual Required Contribution (927)
Annual OPEB Cost 11,750
Contributions Made (18,431)
' Decrease in Net OPEB Obligation (6,681)
Net OPEB Obligation Beginning of Year 17,993
Net OPEB Obligation End of Year S 11,312
Funding Status and Progress
The funding status ofthe plan as ofthe most recent actuarial valuation date is as follows (in thousands of dollars):
Actuarial Valuation Date
Period Ended
Actuarial Value of Assets (a)
J 2/31/2017 12/31/2017 S 195,200 $
Actuarial Accrued Liability (AAL) (h)
308,747 $
Funded Ratio
(a/b)
Covered Payroll (c)
Unfunded
AAL (UAAL) (b-a)
13,547 63.22% S 184.807
UAAL as a Percentage of Covered Payroll ((b-a)/c)
61.44%
Actuarial Methods and Assumptions
Actuarial valuations of an ongoing plan involve estimates ofthe value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the health care cost trend. Actuarially determined amounts arc subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes lo the financial statements, compares whether the actuarial values of plan assets arc increasing or decreasing over time relative lo the actuarial accrued liabilities for benefits.
The accompanying schedules of employer contributions present trend information about the amounts actually contributed to the plan by employers in comparison to the Annual Required Contribution (ARC), an amount that is actuarially determined in accordance with the parameters of GASB Statement 45, "Accounting and Financial Reporting by Employers for Postemploymcnt Benefits Other Than Pensions". The ARC represents a level of funding that, if paid on an ongoing basis, is projected lo cover normal cost for each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.
Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial
100 FINANCIAL SECTION
Metropolitan Water Reclamation District o f Greater Chicago
methods and assumptions used include techniques that arc designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective ofthe calculations.
The annual required contribution for the current year actuarial valuation uses the entry age normal actuarial cost method and the level percentage of payroll amortization method. Additional assumptions arc summarized in the following table:
Valuation date Actuarial cost method
Amortization method
Amortization period Asset valuation method Actuarial assumptions: Discount Rate Inflation Rate
Health Care Cost Trend Rate Annual Payroll Growth Rate
December 31, 2017 Entry Age Normal
Level Percentage of Payroll Open 30 Years Fair Value
6.50% 3.0%
8.0% Initial
4.5% Ultimate (Year 2023) 3.6%
Trend Information
The OPEB annual required contribution, percentage of annual required contributions contributed and net OPEB obligation for the year ending December 31,2017, are presented below (in thousands of dollars):
Schedule of Employer Contributions
Annual Annual
Fiscal Year Required Contributions Percentage
Ended Contribution to Trust Contributed
2017 $ 11,507 $ 18,431 160.2%
2016 12,472 19.917 159.7
2015 12,472 18.317 146.9
9. Commitments and Rebatable Arbitrage Earnings
The General Corporate Fund has existing purchase order encumbrances of SI,049,694 at December 31, 2017. Construction, Stormwater Management, and Capital Improvements Bond Funds' contract commitments (encumbrances) were $290,252,000 at December 31, 2017. State Revolving Fund Loan commitments of $ 104,982,000 at December 31, 201 7, arc also collectible as contract expenditures are incurred.
The Internal Revenue Code requires that an issuer of tax-exempt bonds rebate to the United States any excess investment earnings made with the gross proceeds of an issue over the amount which would have been earned had such proceeds been invested at a rate equal to the yield on the issue. The Internal Revenue Code offers certain "safe harbors" permitting qualified governments to keep extra earnings that result from arbitrage. The District has made a determination of their probable liability for amounts potentially due to the United States government. As of December 31. 2017, the District has no arbitrage rebate liability.
FINANCIAL SECTION 101
Notes to the Basic Financial Statements
Year ended December 31, 2017
National Pollutant Discharge Elimination System
NPDES Permits. The District operates its water reclamation plants (the "WRPs") in accordance with National Pollutant Discharge Elimination System ("NPDES") permits issued by the IEPA. After several years and substantial litigation, the IEPA reissued the District's NPDES permits for the Stickney, Calumet and O'Brien WRPs. These permits include three special conditions agreed upon by the District and several non-governmental organizations to settle the ongoing litigation on these three NPDES permits. Under these additional conditions, the District will fund a super-gauge to monitor nutrients in the lower Des Plaines River (estimated lo be approximately 5270,000 over the next four years), hire a consultant to prepare an implementation plan to address phosphorous in area waterways, and potentially implement that plan. The District will also have to conduct a feasibility study to determine the cost of reducing phosphorous in the WRPs' effluent to certain levels. If required to reduce the phosphorous in the District's effluent to very low levels, the costs could be substantial.
The District's NPDES permits for the Kirie, Hanover Park, Lemont, and Egan WRPs have not yet been reissued.
NPDES Consent Decree. The District's NPDES permits, in addition to controlling discharges from the WRPs, also impose conditions upon combined sewer system overflows (the "CSOs"). In compliance with the NPDES permits, the District's TARP was developed as a long term control plan to control CSOs. The USEPA alleged that discharges from the District's CSOs have and continue to violate certain permit requirements, including the prohibition on discharging pollutants into waters that cause or contribute to violations of applicable water quality standards for dissolved oxygen, solids, and tloatablcs. IEPAjoincd the USEPA in alleging the stated water quality violations. Entities with combined sewer systems that allegedly are in violation of applicable water quality standards are subject lo an enforceable schedule for the implementation of a long term control plan, with "enforceable" requiring a judgment or a consent decree entered in a federal district court.
In December 2011, the USEPA and IEPA filed a lawsuit against the District for the alleged violations, and lodged a consent decree negotiated between the USEPA, IEPA and the District. The case is captioned United States of America and State of Illinois v. Metropolitan Water Reclamation District of Greater Chicago, 11 CV 08859. Without an admission of liability, the consent decree resolved the federal and state claims associated with the District's CSOs. The consent decree, among other things: (a) establishes a construction schedule with interim milestones for completion and operation of portions ofthe District's TARP plan; (b) obligates the District to advance funds to the U.S. Army Corps of Engineers (the "Corps") for portions of the District's TARP for which the Corps is responsible should federal funds be unavailable to the Corps by the stated deadlines; (c) establishes performance criteria and develops post-construction monitoring for portions ofthe TARP system; (d) requires the District lo continue seasonal operation of debris boats and pontoon boats to control floatablcs in the CAWS; (c) requires the District to submit annual reports on its compliance with the terms of the consent decree; (f) imposes stipulated penalties for violations ofthe decree; (g) imposes a total civil penalty of $675,000, which the District has already paid; (h) requires Ihe District lo implement one or more green infrastructure projects within one year fora minimum of $325,000, which the District has done; and (i) to implement additional green infrastructure projects staggered over the next 15 years that provide a minimum of 10 million gallons of design retention capacity in an individual storm, which the District continues to do.
NPDES Citizen Suit. In May 2011, the Natural Resources Defense Council. Sierra Cub, and Prairie Rivers Network (the "NGOs") filed a Clean Water Act ("CWA") citizen suit against the District in the District Court alleging violations of CWA-bascd water quality standards. The District vigorously defended against this lawsuit, and ultimately reached a settlement at the same time as it reached a settlement in the NPDES permit appeal pending before the IPCB. As part of this settlement, in addition to agreeing to recommend that the IEPA add three more special conditions into its NPDES permits for Stickney, Calumet, and O'Brien WRPs, the District agreed lo pay approximately $1.8 million to plaintiffs' attorneys in fees and costs. Upon the IPEA's reissuance ofthe Stickney, Calumet, and O'Brien WRP's NPDES permits, in October 201 7. the District paid the plaintiffs' fees and costs. This litigation has now concluded
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Metropolitan Water Reclamation District of Greater Chicago
Class Action Flooding Claims. The District has previously been and is presently a parly to several proposed class action lawsuits pending in the Circuit Court of Cook County arising out of local sewer back-ups and overland flooding resulting in basement flooding. The District is also in receipt of flooding claims in which lawsuits have not yet been filed. These lawsuits and claims are generally brought in tort, or for constitutional or statutory violations. As of the date of this CAFR, the Circuit Court of Cook County and the Illinois Appellate Court for the First District have ruled in the District's favor in every fully-adjudicated matter. A constitutional question was appealed to the Illinois Supreme Court, was answered, and remanded back to the Circuit Court for further proceedings. Other cases are currently on appeal to the Illinois Appellate Court for the First District.
10. Risk Management and Claims
The District is primarily self-insured for the "working layer" of losses and purchases excess insurance to assist in the response to catastrophic claims. Under the Reserve Claim Fund the District may levy an annual property tax not to exceed .005% of the equalized assessed valuation of taxable property within the District's territorial limits. The Reserve Claim Fund can be used for the payment of claims, awards, losses, judgments, liabilities, settlements, or demands and associated attorney's fees and costs that might be imposed on or incurred by such sanitary district in matters including, but not limited to, the Workers' Compensation Act or the Workers' Occupational Diseases Act, any claim in tort, any claim of deprivation of any constitutional or statutory right or protection, for all expenses, fees, and costs, both direct and in support of any property owned by such sanitary district which is damaged by fire, flood, explosion, vandalism or any other peril, natural or manmadc. The aggregate amount that may accumulate in the Reserve Claim Fund cannot exceed .05% of the equalized assessed valuation. The Reserve Claim Fund accounts are included in the General Corporate Fund as described in Note 1 .b to the financial statements.
From time to time, the District may be involved in various litigation relating to claims arising from general liability, property damage, automobile liability, personal injury, employment practices, marine liability, and public officials liability. The majority of these claims and judgments would be covered by insurance or paid from the Reserve Claim Fund accounts.
The District may be involved in various litigation relating to claims arising from construction contracts. Construction related liability claims can typically be tendered to the Contractor for defense and indemnification. Most other claims and judgments involving disputed construction contracts would be paid by the Capital Improvements Bond or Construction Funds.
The District may also be involved in various litigation for claims relating to environmental regulations. Under current environmental protection laws, the District may be ultimately responsible for the environmental remediation of some of its leased-out properties. The District has developed a preliminary estimate of environmental remediation costs for major lease sites. The range of such estimated costs at December 31, 2017, is between S26.5 million and $39.4 million. The District is ofthe opinion that the tenants (except for those who are bankrupt, out of business, or otherwise financially unable to perform) would ultimately be liable for the bulk, if not all, of these site cleanup costs. Negotiations are ongoing between the District's lawyers and the tenants to resolve remedial activity and cost liability issues. The current estimated cost was determined to be $3 1,575,000 with an estimated cost recoverable amount of $22,150,000 resulting m $9,425,000 being recognized at December 31, 2017 in the liabilities of the government-wide financial statements. Of this amount, none of the current liability is classified as short-term and $9,425,000 is considered a long-term liability These estimates are subject to changes as a result of price increases, changes in technology and new laws and regulations. These estimates were generated using the expected cash Hows technique. GASB Statement No. 49 addresses accounting and financial reporting standards for pollution (including contamination) remediation obligations, which are obligations to address the current or potential detrimental effects of existing pollution by participating in pollution remediation activities such as site assessments and cleanups. The scope ofthe document excludes pollution prevention or control obligations with respect to current operations, and future pollution remediation activities that are required upon retirement of an asset.
FINANCIAL SECTION 103
Notes to the Basic Financial Statements
Year ended December 31, 2017
The District provides health insurance bcnclits to employees through a fully insured health maintenance organization and a scl f-insurcd comprehensive indemnity/PPO plan. The District provides dental insurance benefits through a fully insured dental maintenance organization and a self-insured dental indemnity plan. The District does not purchase stop-loss insurance for its sel f-insurcd comprehensive indemnity/PPO plan. The District provides life insurance benefits for active employees through an insured life insurance program.
Additional insurance policies in effect at December 31, 2017, are listed below. There were no reductions in insurance coverage from the prior year. Settled claims have not exceeded this coverage in any of the past three fiscal years. The current insurance coverage and risk retention related lo these policies is as follows:
Marine Liability
Aggregate $10,000,000
Deductible $10,000
Excess Liability
Aggregate $50,000,000
Deductible SI.250,000
Deductible - Flood Class Action $5,000,000
Deductible - Employers Liability $1,250,000
Government Crime
Forgery or Alteration
Per Occurrence $750,000
Deductible $50,000
Employee Theft (including Faithful Performance)
Per Occurrence $6,000,000
Deductible $100,000
Computer Fraud
Per Occurrence $6,000,000
Deductible SI 00,000
Funds Transfer Fraud
Per Occurrence $6,000,000
Deductible SI 00,000
Property Insurance
Per Occurrence SI,500,000,000
Deductible SI,000,000
Earth Movement
Per Occurrence $250,000,000
Deductible . $1,000,000
Flood and Water Damage
Per Occurrence .. $250,000,000
Deductible $1,000,000
Flood and Water Damage - I.ockport Powerhouse
Per Occurrence. $200,000,000
Deductible ......... ... $1,000,000
Group Travel Accident
Aggregate Limit . .. $10,000,000
Accidental Death r
Per Employee (5 times salary up to litis maximum) 5500,000
Accidental Dismemberment. Paralysis and oilier Coverages
Per Loss % per Schedule
104 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
Pension & Welfare Fiduciary Liability
¦ Aggregate S5.000.000
Self-Insured Retention $10,000
Group Term Life (basic)
Per Employee $20,000
The following changes in claims liabilities for the past two years have been calculated and include claims reported but not settled as well as those incurred but not reported in the government-wide financial statements (in thousands of dollars):
Claims Payable at January 1 Claims incurred
Changes in prior years' claims estimate
Claim payments
Claims Payable at December 31
2017
40,236 6,905 (9,567) (6,905)
30,669
2016
53,570 4,786 (13,334) (4,786)
40,236
11. Long-Term Debt
The following is a summary of general long-term liability activity of the District for the year ended December 31 2017 (in thousands of dollars):
Balance January 1, 2017"
Balance December 31, 2017
Due Within One Year
Governmental long-term liabilities:
Bonds and notes payable:
General obligation debt
Converted bond anticipation notes
Bond anticipation notes
Total bonds & notes payable Other Bond Cost:
Premium
Net bonds and notes payable Other liabilities:
Claims and judgments
Compensated absences
Capital lease (note 14)
OPEB obligation (note 8)
Net pension liability, (note 7)
Total governmental lonu-term liabilities
— S 39,281 178,420
217,701
(150,503)
(13.426) (163,929)
(9,567) (1,702) (2,473) (6,681) (362,1 19)
$ 1.963.045 ¦ 806.563 157.390 2,926,998
3,176,444 155,127
217,701
30,669 22,811 38,574 11,312 1,079,566
195.674 3,122.672
7,113 2,516 2.595
27
40.236 24,486 41,047 17.993 1.073,1 13
368.572
S 4.319,547 S 586.300 $ (546,471) S 4.359,376 S 167,351
Liabilities for the Bonds and Bond Anticipation Notes are paid from the Debt Service Fund. Liabilities for Compensated Absences are primarily paid from the General Corporate and Stormwater Management Funds. Most claims resulting from construction projects are paid from either the Capital Improvements Bond or the Construction Funds, while all other claims arc paid from the Reserve Claim Fund accounts in the General Corporate Fund.
FINANCIAL SECTION 105
Notes to the Basic Financial Statements
Year ended December 31, 2017
As of December 31, 201 7, the annual debt service requirements for general obligation bonds arc shown below (in thousands ofdollars):
Bonds Payable Maturity Table
Maturing
2018
2019
2020
2021
2022 2023-2027 2028-2032 2033-2037 2038-2042 2043-2046
Capital Improvement & Alternate Revenue Bond Series (2.000-5.720%) (Issued 08/09 to 7/16)
$
$
29,450 22,410 13,740 15,065 11,605 110,575 224,080 499,680 214,755 82,580
1,223,940 $
Total Interest
86,251 57,107 54,979 55.419 55,336 253,847 178,875 45,498
114,603 110,450 106,580 103,048
99,504 441,924 340,887 189,505
43,165 8,457
Total Principal
: 141.701
112,587
104,249
105,984 '
107,291
531,487
611,800
685,233
214,755
82,580
787,312 $ 2,697,667 S 1,558,123
Expenditures for principal and interest made on January I, 2018 approximated $57,057,000 and $7,563,000, respectively.
Alternate Revenue Bonds
Bond proceeds of $50.0 million 2016 Tax Series E bonds and $50.0 million 2014 Tax Series B bonds are used to fund a portion ofthe Stormwater Management Program projects. The pledge of the Stormwater Management Fund tax levy will remain until their final maturities in December 2045. The District has covenanted in the Series 2016E and 2014B Bond Ordinances to provide for, collect, and apply such Stormwater Management Tax Receipts to the payment ofthe 2016E and 2014B Bonds, and the provision of not less than an additional .25 times the annual debt service on the 2016E and 2014B bonds. The amount of pledges remaining at December 31. 2017 is $ 185,265,000 as shown below (in thousands ofdollars).
Pledged
Revenue Debt Service Expenditures
Issue Collected Principal Interest Total
2016 Tax Series E S S 50.000 $ 46.962 $ 96,962
2014 Tax Series B 8.666 48.145 40.158 88.303
Total S 8,666" S 98. hF S 87.120~ S 185,265
20J6 Bond Issues
In June 2016, the District issued S28(),930,000 m General Obligation Refunding Bonds, Unlimited Tax Series A, with maturity dates from 2023 to 2031. The bonds were issued at a premium of S6S,206,452. Interest accrues on the bonds at a rate of 5.0%, payable on December I and June 1. The bonds were issued to refund $346,600,000 of outstanding principal amount, plus accrued interest, of May 2006 Unlimited Tax Series.
In June 2016, the District issued S41,330,000 in General Obligation Refunding Bonds, Limited Tax Scries B. with maturity dates from 2023 to 2031. The bonds were issued at a premium of 59,835.301. Interest accrues on the bonds at a rate of 5.0%, payable on December I and June 1. The bonds were issued to refund $50,790,000 of outstanding principal amount, plus accrued interest, of May 2006 Limited fax Scries.
106 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
In June 2016. Ihe District issued $30,000,000 o(Taxable General Obligation Capital Improvement Bonds, Unlimited Tax Scries C (Green Bonds), with maturity dates from 2044 to 2045. The bonds were issued at a premium of $5,739,300. Interest accrues on the bonds at a rate of 5.0%, payable on December I and June 1.
In June 2016, the District issued $20,000,000 of Taxable General Obligation Capital Improvement Bonds, Limited Tax Series D (Green Bonds), with maturity dates from 2022 to 2030. The bonds were issued at a premium of $4,718,891. Interest accrues on the bonds at a rate of 5.0%, payable on December 1 and June 1.
In June 2016, the District issued $50,000,000 of Taxable General Obligation Bonds, (Alternate Revenue Source), Unlimited Tax Series E (Green Bonds), with maturity dates from 2022 to 2045. The bonds were issued at a premium of $10,545,322. Interest accrues on the bonds at a rate of 5.0%, payable on December 1 and June I.
In June 2016, the District issued $4,000,000 ofTaxable General Obligation Capital Improvement Bonds, Limited Tax Series F (Qualified Energy Conservation Green Bonds), with a maturity date of December 1, 2036. Interest accrues on the bonds at a rate of 4.0%, payable on December 1 and June 1.
2015 Bond Issues
In January 2015, the District issued $100,000,000 ofTaxable General Obligation Capital Improvement Bonds, Unlimited Tax Series A (Green Bonds), with maturity dates from 2039 to 2044. The bonds were issued at a premium of $14,440,000. Interest accrues on the bonds at a rate of 5.0%, payable on December 1 and June 1.
In January 2015, the District issued $50,000,000 ofTaxable General Obligation Bonds, (Alternate Revenue Source), Unlimited Tax Series B (Green Bonds), with maturity dates from 2016 to 2044. The bonds were issued at a premium of $7,720,129. Interest accrues on the bonds at rates ranging from 2.0% to 5.0%, payable on December 1 and June 1.
In January 2015, the District issued S75,000,000 ofTaxable General Obligation Capital Improvement Bonds, Limited Tax Series C (Green Bonds), with maturity dales from 2016 to 2028. The bonds were issued at a premium of $14,022,875. Interest accrues on the bonds at rates ranging from 2.0% to 5.0%, payable on December 1 and June I.
In January 2015, the District issued $70,805,000 in General Obligation Refunding Bonds, Limited Tax Scries D, with maturity dales from 2016 to 2022. The bonds were issued at a premium of S12,346,220. Interest accrues on the bonds at rates ranging from 2.0% to 5.0%, payable on December 1 and June 1. The bonds were issued to refund $76,050,000 of outstanding principal amount, plus accrued interest, of July 2006 Limited Tax Series.
2011 Bond Issues
In July 2011, the District issued $30,000,000 ofTaxable General Obligation Capital Improvement Bonds, Limited Tax Scries A, with maturity dates from 2013 to 2016. Interest accrues on the bonds at rates ranging from 0.891 % to 2.229%. payable December 1 and June I.
In July 2011, the District issued $270,000,000 of General Obligation Capital Improvement Bonds, Limited Tax Series B, with maturity dates from 201 7 lo 2032. flic bonds were issued at a premium of $27,686,556. Interest accrues on the bonds at rates ranging from 3.0% to 5.0%, payable December 1 and June 1.
In July 20) 1, the District issued $100,000,000 of General Obligation Capital Improvement Bonds, Unlimited Tax Series C. with maturity dales from 2013 to 2031. The bonds were issued at a premium of $9,657,071. Interest accrues on the bonds at rates ranging from 3.0% to 5.0%, payable December 1 and June 1.
FINANCIAL SECTION 107
Notes to the Basic Financial Statements
Year ended December 31, 2017 2009 Bond Issues
In August 2009, the District issued $600,000,000 in taxable General Obligation Capital Improvement Bonds, Limited Tax Series of August 2009 (Build America Bonds - Direct Payment). The bonds have an interest rate of 5.72%, payable on December 1 and June 1, and mature on December 1,2038. The bonds arc subject to mandatory sinking fund redemption on December 1 in years 2033 through 2038. The Build America Bonds (BAB) program was authorized as part ofthe American Recovery and Reinvestment Act of 2009 and includes a subsidy of 35% of interest cost to be paid to the District by the U.S. Treasury for the life of the bonds. The federal subsidy reduces the effective interest rate on the bonds to 3.72%. Sequestration may reduce the subsidy received from the U.S. Treasury in future years.
2007 Bond Issues
In March 2007, the District issued $188,315,000 in fixed rate General Obligation Refunding Bonds, Unlimited Tax Series A, at a premium of S16,775,789. The bonds have interest rates from 4.00 to 5.00%, payable on December 1 and June 1, and maturity dates from 2014 to 2022.
In March 2007, the District issued $91,845,000 in General Obligation Refunding Bonds, Unlimited Tax Series B, at a premium of $17,462,417 and $101,860,000 in General Obligation Refunding Bonds, Limited Tax Series C, at a premium of $18,859,718. Both scries have an interest rate of 5.25%, payable on December 1 and June 1, and maturity dates from 2025 to 2035. ,.
The 2007 Unlimited Tax Series A Bonds were issued to refund $146,000,000 of outstanding principal amount, plus accrued interest, of 2002 Limited Tax Scries E and $57,900,000 of outstanding principal amount, plus accrued interest, of 2002 Unlimited Tax Series C.
The 2007 Unlimited Tax Series B Bonds were issued to refund SI 00,000,000 of outstanding principal, plus accrued interest, of2006 Unlimited Tax Series. The 2008 Limited Tax Series C Bonds were issued to refund $110,435,000 of outstanding principal, plus accrued interest, of 2006 Limited Tax Scries.
Capital Improvement Bonds, IEPA Series
The District has adopted bond ordinances authorizing issuance of its general obligation bonds to the Illinois Environmental Protection Agency (IEPA). The most recent such authorization was pursuant to a bond ordinance adopted in calendar year 2016 in the amount of $500,000,000 for Capital Improvement Bonds, 2016 IEPA Series. The IEPA approves various capital improvements related to sewage treatment works and Hood control facilities for funding from the State Water Pollution Control Revolving Loan Fund (SRF). Once a project has been approved, the State offers the District a loan from the State's Revolving Loan Fund, which the District incorporates into the form of the bond which is issued to the IEPA (the Loan/Bond). When work on the project begins, the District pays the contractor. The District receives a corresponding amount of advance on the Loan/Bond from the IEPA. This form of loan is commonly referred to as a drawdown loan. The advances continue on the Loan/Bond until the project is completed or the amount of the loan fully advances, whichever occurs first. In general, within two years ofthe first advance on a Loan/Bond, the IEPA promulgates a repayment schedule on such Loan/Bond. The repayment schedules call for level payments of principal and interest, collectively, over a 20 year period beginning within six months ofthe date the repayment schedule is promulgated. Under this authority, the IEPA has approved the following loan amount:
2017 S 16,700,000
2016 . ....... $ 155,900,000
108 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
In 2014, the District authorized the issuance of $425,000,000 of Capital Improvement Bonds, 2014 IEPA Scries, for capital improvements related to sewage treatment works and flood control facilities. The terms and conditions are similar to the 2016 IEPA Series. Under this authority, the IEPA has subsequently approved the following loan amounts:
2017 S 4,300,000
2016 S 151,200,000
2015 S 54,600,000
2014 S 83,600,000
2012 S 17,400,000
In 2012, the District authorized the issuance of S300,000,000 of Capital Improvement Bonds, 2012 IEPA Series, for capital improvements related to sewage treatment works and flood control facilities. The terms and conditions are similar to the 2014 IEPA Series. Under this authority, the IEPA has subsequently approved the following loan amounts:
2015 S 13,700,000
2014 S 66,100,000
2013 S 198,300,000
2012 S 15,000,000
State Revolving Fund (SRF) Loan proceeds of $175,245,000 arc recognized as "other financing sources" in the Capital Improvements Bond Fund. The amount recognized is based upon reimbursable expenditures incurred during the fiscal year. The amount recognized as SRF proceeds is also recognized as a long-term liability in the government-wide Statements of Net Position.
The District refinances bond anticipation notes through the issuance of its Capital Improvement Bonds in the amount of the bond anticipation notes, plus accrued interest. As a result, there is no debt service required until these notes are converted into bonds. The District has accrued principal of $ 175,245,000 and interest of S3.175,000 through the balance sheet date on bond anticipation notes resulting in the total increase to long-term debt of $178,420,000.
The converted bond anticipation notes, a reduction of long-term debt, of $39,281.000 in 2017 represented the sum of converted bond anticipation note principal of $38,708,000 and interest in the amount of S57.3,000.
2017 Bond Issues and adjustments to existing issues under the IEPA 2012 and 2014 authority included:
July 2017 - The District issued $2,233,000 of Capital Improvement Bonds - IEPA Scries 12C, through the conversion of the sum of bond anticipation note principal of $2,206,000 and interest of $27,000 with maturity dates from January 1, 2018 to January 1, 2036. Interest on the bonds accrues at a rate of 1.995%, payable January 1 and July 1.
July 2017-The District issued $970,000 of Capital Improvement Bonds - IEPA Series 12D, through the conversion ofthe sum of bond anticipation note principal of $964,000 and interest of $6,000 with maturity dates from January 1. 2018 to January 1, 2032. Interest on the bonds accrues at a rate of 1.93%, payable January 1 and July I.
July 2017 - The District issued $5,812,000 of Capital Improvement Bonds - IEPA Scries 12F, through the conversion ofthe sum of bond anticipation note principal of $5,748,000 and interest of $64,000 with
FINANCIAL SECTION 109
Notes to the Basic Financial Statements
Year ended December 31, 2017'
maturity dates from January 1, 2017 to July I, 2032. Interest on the bonds accrues at a rate of 1.93%, payable January 1 and July 1.
July 2017 - The District issued 51,608,000 of Capital Improvement Bonds- IEPA Series 12H, through the conversion ofthe sum of bond anticipation note principal of$l ,587,000 and interest of $21,000 with maturity dates from January 1, 2018 to January 1, 2032. Interest on the bonds accrues at a rate of 1.93%, payable January 1 and July 1.
July 2017-The District issued SI,256,000 of Capital Improvement Bonds - IEPA Series 121, through the conversion of the sum of bond anticipation note principal of $1,237,000 and interest of $19,000 with maturity dates from January 1, 2018 to July 1, 2036. Interest on the bonds accrues at a rate of 2.21%, payable January 1 and July 1.
July 2017 -The District issued $952,000 of Capital Improvement Bonds - IEPA Series 12K, through the conversion of the sum of bond anticipation note principal of $939,000 and interest of $ 13,000 with maturity dates from January 1, 2018 to July 1, 2035. Interest on the bonds accrues at a rate of 1.995%, payable January 1 and July 1.
July 2017 - The District issued S447,000 of Capital Improvement Bonds - IEPA Series 12L, through the conversion ofthe sum ofbond anticipation note principal of $438,000 and interest of $9,000 with maturity dates from January 1, 2018 to July 1, 2036. Interest on the bonds accrues at a rate of 2.21%, payable January 1 and July 1.
July 2017 -The District issued $10,034,000 ofCapilal Improvement Bonds - IEPA Series 12M, through the conversion of the sum ofbond anticipation note principal of S9,854,000 and interest of SI 80,000 with maturity dates from January 1, 2018 to July 1, 2037. Interest on the bonds accrues at a rate of 2.21%, payable January 1 and July 1.
July 2017-The District issued $254,000 of Capital' Improvement Bonds - IEPA Series 12N, through the conversion ofthe sum ofbond anticipation note principal of $250,000 and interest of S4,000 with maturity dates from January 1, 2018 to January 1, 2036. Interest on the bonds accrues at a rate of 1.995%, payable January I and July I.
July 2017 -The District issued $133,000 of Capital Improvement Bonds - IEPA Series 120, through the conversion of the sum ofbond anticipation note principal of $ 132,000 and interest of $ 1,000 with maturity dates from January 1, 2018 lo July I. 2035. Interest on the bonds accrues at a rate of 1.995%, payable January 1 and July 1.
July 2017 - The District issued 58,476,000 of Capital Improvement Bonds - IEPA Series 14A, through the conversion ofthe sum ofbond anticipation note principal of 58,321.000 and interest of $ 155,000 with maturity dates from January 1, 2018 to July 1, 2036. Interest on the bonds accrues at a rate of 2.21%, payable January 1 and July 1.
July 201 7-The District issued $447,000 of Capital Improvement Bonds - IEPA Series 14B. through the conversion ofthe sum ofbond anticipation note principal of .5440,000 and interest of S7,000 with maturity dates from January 1. 2018 to January 1, 2036. Interest on the bonds accrues at a rate of 2.21%, payable January 1 and July 1.
July 2017 -The District issued $3,841,000 of Capital Improvement Bonds - IEPA Series I4C, through the conversion ofthe sum ofbond anticipation note principal of $3,806,000 and interest of $35,000 with
110 FINANCIAL SECTION
, Metropolitan Water Reclamation District of Greater Chicago
maturity dates from January 1, 2018 to July 1, 2036. Interest on the bonds accrues at a rate of 2.295%, payable January 1 and July 1.
July 2017 - The District issued $1,164,000 of Capital Improvement Bonds - IEPA Scries 1411, through the conversion of the sum ofbond anticipation note principal of SI,150,000 and interest of $14,000 with maturity dates from January 1, 2018 to July 1, 2036. Interest on the bonds accrues at a rate of 1.86%, payable January 1 and July 1.
• July 2017 - The District issued $1,654,000 of Capital Improvement Bonds - IEPA Series 14J, through the conversion of the sum ofbond anticipation note principal of $1,636,000 and interest of $18,000 with maturity dates from January 1, 2018 to January 1, 2036. Interest on the bonds accrues at a rate of 2.21%, payable January 1 and July 1.
Beginning in 1991, the District's Board of Commissioners adopted ordinances providing for the issuance ofbond anticipation notes. The bond anticipation notes are issued exclusively to cover interim project loan advances from the Illinois Environmental Protection Agency. Principal and interest liabilities related to the bond anticipation notes were $296,529,000 at December 31,2017. Ofthe bond anticipation notes outstanding at December 31,2017, $37,073,000 will be financed through IEPA Scries 2012 bonds, $ 132,506,000 will be financed through IEPA Series 2014 bonds, and the remaining $126,950,000 will be financed through IEPA series 2016 bonds. None of these outstanding bond anticipation notes are expected to be repaid within the next calendar year; therefore, the notes arc reported as part of long-term debt.
Refunding Transactions
The District had no outstanding defeased obligations al December 31, 2017.
12. Interfund Transactions
The interfund receivable and payable balances at the end ofthe year are reported as "due from/to other funds" in the Governmental Funds Balance Sheets and are eliminated in the government-wide Statements of Net Position. The balances represent payroll transactions paid from the General Corporate Fund that are later reimbursed by other funds. Also, any temporary cash overdrafts are reclassified as interfund receivable/payable balances at the end of the year in the fund balance sheet. Interfund balances are generally repaid within a year of the fiscal year end.
Individual interfund receivable and payable balances at December 31,2017 are as follows (in thousands ofdollars):
Interfund Receivables Payables
General Corporate Fund S 101 S —
Capital Projects Funds:
Stormwater Management Fund (Nonmajor Fund) — 101
S 101 S 101
In addition to the previous table, amounts were due from the Primary Government to the Pension Trust Fund of $ 15.868.000 at December .31, 2017 that represented earned but uncollected property taxes in the Retirement Fund and the government-wide Statements of Net Position.
Transfers between funds as authorized in the budget are recorded as "other financing sources (uses)" in the fund operating statements. In 2017. the Treasurer ofthe District transferred $3,269,000 for principal and interest
FINANCIAL SECTION 111
Notes to the Basic Financial Statements
Year ended December 31. 2017
payments on the 2014 Alternate Bond Debt service from the Stormwater Management Fund to the Debt Service Fund. There was also a transfer of 513,000,000 made from the Capital Improvement Bond fund to the General Corporate Fund in the amount of56,000,000 and the Construction Fund in the amount of $7,000,000 for accumulated Build America Bond interest credit. The transfer of funds into the Construction Fund and out ofthe Stormwater Fund resulted in a net transfer of S3,731,000 as presented on Exhibit A-2 in the Other Governmental / Nonma jor funds. Transfers are eliminated in the government-wide Statements of Activities.
Property Tax Extension Limitation Law
Effective March 1,1995, the Property Tax Extension Limitation Law limits the amount of property taxes the District can extend for years subsequent to 1993. The law limits the District's increase in aggregate tax levy extension to 5% ofthe previous year or to the percentage increase in the consumer price index, whichever is less. The aggregate limitation does not apply to the District's Debt Service and Stormwater Management Fund levies.
As part of the District's Property Tax Levy subject to the Illinois Property Tax Extension Limitation Law, the Construction fund Property Tax Levy is adjusted downward if the estimated increase in the aggregate is more than the allowable extension under the law.
In Section 18-195 ofthe Law, the County Clerk is instructed to proportionally reduce all the levies subject to the limitation unless the taxing district requests otherwise. Through the Levy ordinances, MWRD requests the County Clerk to reduce the entire reduction to the aggregate levy by reducing the Construction Fund as required by Section 18-195 ofthe law. Jn Ordinance 016-013, the 2017 Construction Fund Property Tax Levy, Section 3 specifically states that "entire reduction in the aggregate of all tax levies for said District for the year 2017 required by said Law shall be taken against the Construction Fund levy as set forth in this Ordinance."
In addition, the individual tax levies of the Corporate, Construction, Reserve Claim, Stormwater Management, Corporate Working Cash, and Construction Working Cash Funds have statutory limitations. The Coiporate levy cannot exceed .41% of the equalized assessed valuation, while the Construction levy cannot exceed .10% ofthe equalized assessed valuation and the Corporate Working Cash and Construction Working Cash levies individually cannot exceed .005% ofthe equalized assessed valuation. The Reserve Claim levy cannot exceed .005% ofthe equalized assessed valuation and the aggregate amount which may accumulate in the Reserve Claim Fund shall not exceed .05% ofthe equalized assessed valuation, 'flic Stormwater Management Fund levy cannot exceed .05% ofthe equalized assessed valuation as a result of statutory changes. The Debt Service Fund is limited through debt service extension limitations under the Properly Tax Extension Limitation Law.
Leases
Capital Lease
In December 2000. the Board of Commissioners authorized the District to enter into a long-term contract with an engineering firm to design, build, finance, own, operate, and maintain a 150 dry ton per day biosolids processing facility at the District's Central (Stickney) Water Reclamation Plant, and beneficially use the final product for a period of twenty years.
The cost ofthe biosolids processing facility is considered a capital lease since it will become the property ofthe District at the end ofthe contract. The District also has an option to purchase the facility at the end ofthe fifth, tenth, and fifteenth year of operation for the remaining principal portion ofthe debt. Total payments for the capital lease arc estimated al 583,123,000 for the full term ofthe contract, which will be paid from the Capital Improvements Bond Fund. The gross amount of assets acquired under the capital lease is 554,535,000. During 2017, the District incurred expenses of approximately 52,473,000 for principal and $1,916,000 for interest. The contract expires twenty years from the date of commercial operation, which was declared in July 2010.
112 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
As of December 31, 2017, the future minimum lease payments for the biosolids facility are shown below (in thousands of dollars):
Capital Lease Payable Maturity Table
Total Total Total
Maturing Principal Interest Payments
2018|99|2,595 ~$ 1,795 1 4,390
2,722 1,668 4,390
2,856 1,534 4,390
2.996 1.394 4,390
3,143 1,247 4,390
2023-2027 18,184 3,764 21,948
2028-2029 6,078 224 6,302
Total Minimum Lease Payments $ 38,574 S 11,626 S 50,200
Lease Rentals
The District leases land to governmental and commercial tenants under operating lease agreements for periods of up to 99 years. There were no contingent lease rentals for the period. The commercial leases are considered non-cancellable and the following is a summary ofthe minimum future rentals for these leases at December 31, 2017 (in thousands of dollars):
$ 16,392
16,222
16,222
16,222
16,105
Later Years 386,208
Total Minimum Future Rental Income S 467,371
The cost ofthe land associated with the commercial leases is $5,836,600. The District docs not lease any depreciable assets.
15. Tax Abatements
The District has one tax abatement agreement with the Boeing Company with regard to the Corporate Headquarters Relocation Act m which property taxes are being abated. The agreement was entered into at the authority ofthe Metropolitan Water Reclamation District (as a taxing district) and the District's Board authorization. Eligibility began with the Boeing Project whereby Boeing moved its corporate headquarters to the City of Chicago and qualified as an eligible business under the Relocation Act. This includes $25,000,000 annual world-wide revenues, satisfaction ofthe MBE/WBE requirements, compliance with the resident hiring and prevailing wage requirements, and employing at least 500 full time employees within the City of Chicago, and lease and occupy not less than 150,000 rentable square fect in the 100 North Riverside building.
The District's taxes arc reduced by way of a reimbursement to Boeing in an amount equal to the allocable share , ofthe real estate taxes, or 6.203%. The District is entitled to terminate the agreement or recover all payments if Boeing defaults on their commitments. The 2017 taxes abated totaled $ 118,906.
FINANCIAL SECTION 113
Notes to the Basic Financial Statements
Year ended December 31, 2017
Cook County granted special assessments for the development or redevelopment of commercial and industrial properties. The properties receive a real estate tax incentive as a reduction in the assessment rate. The total estimated impact of these incentives to the District is approximately $9,100,000 in reduced property taxes.
114 FINANCIAL SECTION
i
REQUIRED SUPPLEMENTARY INFORMATION (RSI) OTHER THAN MD&A - Unaudited
Required Supplementary Information (RSI) Other than MD&A - Unaudited
Year Ended December 31, 2017
Modified Approach for Eligible Infrastructure Assets
The District has elected to use the modified approach to report eligible infrastructure and ancillary assets at its seven water reclamation plants (WRP) and its waterway assets. Each of the seven plants represents a separate network, while the waterway assets represent an eighth network. The eight networks are as follows:
O'Brien WRP Basin
Calumet WRP Basin
Egan WRP Basin
Kirie WRP Basin
Hanover Park WRP Basin
Lemont WRP Basin
Waterways
1. Central (Stickney) WRP Basin All systems, subsystems, and components associated with the Central (Stickney)
WRP service area (excluding Waterways Network assets).
All systems, subsystems, and components associated with the O'Brien WRP service area (excluding Waterways Network assets).
All systems, subsystems, and components associated with the Calumet WRP service area (excluding Waterways Network assets and Lemont Network).
All systems, subsystems, and components associated with the Egan WRP service area (excluding Waterways Network assets).
All systems, subsystems, and components associated with the Kirie WRP service area (excluding Waterways Network assets).
All systems, sub-systems, and components associated with the Hanover Park WRP service area (excluding Waterways Network assets).
All systems, subsystems, and components associated with the Lemont WRP service area (excluding Waterways Network assets).
All waterways under the jurisdiction of the District including the Waterways Control System, Lockport Powerhouse and Controlling Works, Chicago River Controlling Works, Wilmette Pumping Station, all District flood control reservoirs and pump stations, sidestrcam elevated pool aeration stations, instream aeration stations, Melas Park, and Centennial Fountain.
Each ofthe above networks is further segregated into systems, subsystems, and components. The network systems are classified by the process How through the network (i.e., collection processes, treatment processes, solids processing, flood and pollution control, and solids drying/utilization). The subsystems of each system represent the major processes (e.g., the treatment processes system includes fine screens, grit tanks, and aeration tanks as subsystems). Components of subsystems comprise the working unit or assembly (e.g., the fine screens subsystem includes conveyors, rakes, and gates as components). Ratings are determined by District civil, mechanical, and electrical engineers, who review the subsystem/component maintenance records and physically inspect the assets.
116 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
Ratings are assessed at the subsystem level and are compiled for reporting puiposes into one rating for each system of a network. The assessment scale used to rate the networks' systems is as follows:
Assessment Description
Relatively new asset or recently rehabilitated or otherwise restored to a like-new asset condition.
(2) Very Good
Good
Acceptable
Fair
Performance successful, operation reliable, no significant maintenance required beyond routine preventative maintenance or minor repair in foreseeable future.
Performance-successful, operation reliable, significant maintenance required in foreseeable future.
Performance successful, operation reliable, significant rehabilitation/ replacement planned in near future.
Performance marginal, operation not reliable without immediate repair/ replacement.
Inoperable or operation significantly impaired.
It is the District's policy to maintain eligible infrastructure assets reported under the modified approach at a level of acceptable or better.
Initial condition assessments ofthe Kirie, Hanover, Egan, O' Brien, Central (Stickney), Calumet, Lemont and Waterways WRP networks were completed between 2002 and 2006.
Condition assessments of each network will continue at least every three years following the initial assessment. The Kirie, Central (Stickney), and Waterways networks were re-assessed in 2017, the Hanover, Calumet, and Lemont networks were re-assessed in 2015 and the Egan and O'Brien networks were re-assessed in 2016.
FINANCIAL SECTION 117
Required Supplementary Information (RSI) Other than MD&A - Unaudited
Year Ended December 31. 2017
The condition assessment ratings and the estimated and actual maintenance and preservation costs for the Kirie, Hanover, Egan, O'Brien, Central (Stickney), Calumet. Lemont, and Waterways WRP networks are as follows:
Condition Assessment Ratings Kirie WRP Network
Subsequent assessment - 2011 Subsequent assessment - 2014 Subsequent assessment - 2017
Hanover WRP Network
Subsequent assessment - 2009 Subsequent assessment - 2012 Subsequent assessment - 2015
Egan WRP Network
Subsequent assessment - 2010 Subsequent assessment - 2013 Subsequent assessment - 2016
O'Brien WRP Network
Subsequent assessment - 2010 Subsequent assessment - 2013 Subsequent assessment - 2016
Central (Stickney) WRP Network Subsequent assessment - 2011 Subsequent assessment - 2014 Subsequent assessment - 2017
Waterways WRP Network Subsequent assessment - 2011 Subsequent assessment - 2014 Subsequent assessment - 2017
Calumel WRP Network
Subsequent assessment - 2009 Subsequent assessment - 2012 Subsequent assessment - 2015
l emont WRP Network
Subsequent assessment - 2009 Subsequent assessment - 2012 Subsequent assessment - 2015
Maintenance/Preservation Costs Kirie WRP Network
Estimated 2017 Actual 2017
Estimated 2016 Actual 2016
Estimated 2015 Actual 2015
Estimated 2014 Actual 2014
Estimated 2013 Actual 2013
Treatment Processes System
3 3 3
3 3 2
3 3
3 2 3
3 3 3
NA NA NA
3 2 ->
3 3 3
3 3 3
3 3 3
NA NA NA
3 3 3
3 3 3
3.304.901) $ 1.065,433
1.014,161)
4.410,046 4.454,223
670,865 3.475.534
3.360.179 3.344.290
4.244.436 2.800,304
Solids Processing System
NA NA NA
1. 139 I 1.007
465 12.067
533.408 763.968
411.621 35.258
KIR.696 K2.6X4
Flood and Pollution Control Svstcm
NA NA NA
NA NA NA
NA NA NA
NA NA NA
NA NA NA
3 3 3
NA NA NA
NA NA NA
517,500 12.066
786.000 267.794
223.105
Solids Drying/ Utilization System
NA NA NA
NA NA NA
NA NA NA
3 3
NA NA NA
2 2 2
NA NA NA
528,008
402.000 142.921
1.167,000 866.076
118 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
Hanover WRP Network
Estimated 2017 Actual 2017
Estimated 2016 Actual 2016
Estimated 2015 Actual 2015
Estimated 2014 Actual 2014
Estimated 2013 Actual 2013
Egan WRP Network
Estimated 2017 Actual 2017
Estimated 2016 Actual 2016
Estimated 2015 Actual 2015
Estimated 2014 Actual 2014
Estimated 2013 Actual 2013
O'Brien WRP Network
Estimated 2017 Actual 2017
Estimated 2016 Actual 2016
Estimated 201 5 Actual 2015
Estimated 2014 Actual 2014
Estimated 2013 Actual 2013
Central (Stickney) WRP Network
Estimated 2017 Actual 2017
Estimated 2016 Actual 2016
Estimated 201 5 Actual 2015
Estimated 2014 Actual 2014
Estimated 2013 Actual 2013
123300 162,368
484.028 646,796
1,054,822 1,703.347
142,317 243,960
155,517 231,153
Treatment Processes System
647,312 S 684,767
3,119,591 2,424,545
696.765 2,534,283
732,151 855,994
778,851 1,014,670
1,831,349 1,889,009
1,513.197 2,261,452
626,241 862,655
653,741 865,065
568,170 S 2,457,544 547,567 1,602,807
6,066,015 8,092,469
4,403,940 3,590,430
2,885,084 3,026,570
5,503,337 5,309,118
13,372,590 14.791,414
6.201,615 8,135.664
7,256,184 8.380,776
7.787,840 9,530,828
4,350,679 3,744,215
4,005.365 2,494.728
9,572,949 10,162,949
2,771.072 6.890,505
5.355.1 15 5.618,267
10,460,115 12,046.926
1 1.806.700 18.501.753
48.806,200 32.685,410
19.534,565 1 1.535.580
17.334,819 20.427.807
16.765.601 16.923.785
Solids Processing System
221.947 210,660
676,096 720,040
519,408 1,213,150
674,596 543.204
1,808.221 1,581.782
1,612,479 991,795
5,202,317 7.057,944
3,821,483 4,257,420
8,833.464 5,957.431
2,045.064 1,758.866
371.200 389.566
690.100 891,486
1,501,758 1,260.479
537.919 432.51 7
1,267.919 475.148
7.004.600 6.361.137
24.028.680 33,364.380
8,059.908 3.029.722
10.565.977 10.348.973
9.453.022 10.563.927
Flood and Pollution Control System
200.000
28,150 15.584
77,905 87.156
610.475 14,735
2,621.400 2.136,685
1.383.300 792.719
2.740.624 3.840.355
3.061.000 2.732.851
2,097.000 3,038,583
742.000 1.237.008
412.700 6.012.677
1.725.000 781.105
12 1.61 5
Solids Drying/ Utilization System
33,200 33,476
214,300 377.701
517.408 33,479
65,800
72,400 29,223
14,400 253,655
41,100 42,768
1.521.700 1.705,427
7,274.800 21,228.946
4.528.808 964,557
1.377.507 2.444,671
2.027,507 1.555.668
FINANCIAL SECTION 119
Required Supplementary Information (RSI) Other than MD&A - Unaudited
Year Ended December 31, 2017
Collection Processes System
Treatment Processes ' System
Solids Processing System
Flood and Pollution Control System
Solids Drying/ Utilization System
Waterways WRP .Network
Estimated 2017 Actual 2017
Estimated 2016 Actual 2016
Estimated 2015 Actual 2015
Estimated 2014 ¦ Actual 2014
Estimated 2013 Actual 2013
Calumet WRP Network
Estimated 2017 Actual 2017
Estimated 2016 Actual 2016
Estimated 2015 Actual 2015
Estimated 2014 Actual 2014.
Estimated 2013 Actual 2013
Lemont WRP Network
Estimated 2017 Actual 2017
Estimated 2016 Actual 2016
Estimated 2015 Actual 2015
Estimated 2014 Actual 2014
Estimated 2013 Actual 2013
246,100 10,953.571
115,525 1,149,455
1,437
,323
3.244,935 3.330,986
24,346,293 12,644,323
15,532,197 5,004,441
5,891,856 4,295,832
6,229,856 3.505.024
70.200 115,903
837,722 1.415,229
47.000 17.475
47,000 (4,607)
10,240
8,423,738 8,956,454
16,082,140 18,205,026
3,612,840 7,014,378
6,156,523 6.741,305
6,288,023 5,932,302
8,800 4,739
126,100 348,026
443,665 1,321,857
34.200 417
34,200 8,294
1,737.410 1,848,660
5,211,367 5,457,023
1,904.283 3,798.937
2,241,157 2,366,667
2,330,057 2,416.419
262.007
23.898
11.957.187 1.151.151
27.544.100 3,178,612
9,534,574 6.365,775
1,314,200 831,265
1.319.000 1,047.698
172.787 173.529
1,392,200 294,111
21,221.249 5,119,450
1,949.900 590,908
915.100 734.104
558.800 509,922
744,800 675,730
14,000 780,400
120 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
Schedule of Changes in the District's Net Pension Liability and Related Ratios Last Three Fiscal Years (1)
(in thousands ofdollars)
Total pension liability:
Service cost Interest
Changes of benefit terms
Differences between expected and actual experience Changes of assumptions
Benefit payments, including refunds of employee contributions Net change in total pension liability
Total pension liability - beginning Total pension liability - ending
Plan fiduciary net position:
Contributions - employer Contributions - employee Net investment income
Benefit payments, including refunds of employee contributions
Administrative expense
Other
Net change in plan fiduciary net position
Plan fiduciary net position - beginning Plan fiduciary net position - ending
Net pension liability - ending
Plan fiduciary net position as a percentage of the total pension liability
Covered-employee payroll
Nei pension liability as a percentage ol"covered-employee payroll
2017 2016 2015
$ 32,058 $ 32,228 $ 31,602
173,861 168,530 163,338
13,814 ' 14,422 10,861
(147,336) (140,509) (133,898)
72,397 74,671 71,903
2,359,766 2,285,095 2,213,192
2,432,163 2,359,766 2,285,095
80,259 71,041 73,906
20,831 21,385 18,975
113,586 (1,428) 81,601
(147,336) (140,509) (133,898)
(1,503) (1,660) (1,407)
107 29 4_
65,944 (51,142) 39,181
1,286,653 1,337,795 1,298,614
1.352,597 1,286.653 1,337,795
S 1,079,566 $ 1,073.113 S 947,300
55.61% 54.52% 58.54%
$ 182,640 S 177,792 $ 176.184
591.09% 603 58% 537 68%
(1) The District implemented the provisions of GASB 68 in Fiscal Year 2015. The District has presented as many years as are available and will show information for ten years as the additional years' information become available.
FINANCIAL SECTION 121
Required Supplementary Information (RSI) Other than MD&A - Unaudited
Year Ended December 31, 2017
Schedule of District Contributions Last 10 Years
(in thousands ofdollars)
Year
2017 2016 2015 2014 2013 2012 2011 2010 2009 2008
Actuarially Determined Contributions
S 64,596
62,603
64,478
68,414
74,829
69,393
61,873
54,790
49,758
47,090
Actual Contributions in Relation to the Actuarially Determined Contributions
! 80,259
71,041
73,906
92,944
65,098
37,379
29,918
32,154
33,407
27,947
Contribution Deficiency/ (Excess)
S
(15,664) (8,438) (9,428)
(24,530) 9,731 32,014 31,955 22,636 16,351 19,143
Covered-employee Payroll
i 182,640
177,792
176,184
169,376
163,817
164,275
174,486
176,915
167,865
158,831
Contribution
as a Percentage of Covered-em plovee Payroll
43.94%
39.96%
41.95%
54.87%
39.74%
22.75%
17.15%
18.17%
19.90%
17.60%
Notes to the Schedule of District Contributions
Valuation Date: The District's actuarially determined contribution (ADC) is calculated as of December 31, 2016. Methods and Assumptions used to determine the ADC:
Actuarial cost method Amortization method
Remaining amortization period Asset valuation method Investment rate of return Inflation Salary increases Payroll growth Termination rates Mortality rates
Retirement rates Disability rates
Entry age normal
Level percent of pay. Prior to 2013, 30 year open amortization. From the 2013 ADC calculation, closed to 2050.
34 years remaining as of 1/1/17
5 years smoothed value
7.50%, net of investment expense, including inflation 2.5%
Varies by service 3.70%
Termination rales vary by age and gender.
I Iealthy Members. RP-2000 Combined Healthy Mortality Table with Generational Mortality Improvements (Scale AA)
Distillled Members. RP-2000 Disabled Retiree Mortality 'fable.
Retirement rates are based on the most recent experience analysis and vary by age and service of member Rates were reduced by 20% as ofthe 201 I ADC calculation to rcllect actual experience
Disability rales vary by age.
A copy ofthe Pension Plan CAFR may be obtained by accessing the Metropolitan Water Reclamation District Retirement Fund's website at www.mwrdrf.org .
122 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
Progress in Funding Other Post Employment Trust Fund
The following schedule presents the progress in funding the OPEB Trust Fund over the last three years:
(in thousands ofdollars)
Period Ended
12/31/2017 12/31/2016 ¦ 12/31/2015
Actuarial Valuation Date
12/31/2017
12/31/2015
12/31/2015
Actuarial Value of Assets (a)
$ 195,200 149,329 149,329
Actuarial Accrued Liability (AAL) (b)
308,747 286,646 286,646
Unfunded
AAL (UAAL) (b-a)
S 113,547
137,317
137,317
Funded Ratio (a/b)
63.22%
52.10%
52.10%
Covered Payroll (c)
184,807 176,757 176,757
UAAL as a Percentage of Covered Payroll ((b-a)/c)
61.44%
77.69%
77.69%
Actuarial valuations are required to be completed every two years. The most recent actuarial valuation was completed as of December 31, 2017.
A copy of the OPEB Trust Fund CAFR may be obtained by accessing the District's website at www.mwrd.org
FINANCIAL SECTION 123
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OTHER SUPPLEMENTARY INFORMATION
COMBINING AND INDIVIDUAL FUND STATEMENTS
AND SCHEDULES
NON-MAJOR GOVERNMENTAL FUNDS
CONSTRUCTION FUND
Fund established to account for proceeds of annual property tax lev ies and certain other revenues used for the acquisition of long-term assets used in principal functions of the District.
STORMWATER MANAGEMENT FUND
Fund established to account for the annual property taxes which arc specifically levied lo finance all,activities associated with stormwater management, including construction projects.
Exhibit B-1
Combining Balance Sheets - Nonmajor Governmental Funds
December 31. 2017
Assets
Cash
Certificates of deposit Investments Prepaid insurance Taxes receivable, net Other receivable
Total assets
Liabilities, Deferred Inflows of Resources and Fund Balances
Liabilities:
Accounts payable and other liabilities
Due lo other funds
Total liabilities
Deferred inflows of resources:
Unavailable tax revenue
Total deferred inflows of resources
Fund balances:
Nonspendable:
Prepaid insurance
Restricted for:
Working Cash
Capital projects
Unassigned
Total fund balances
Total liabilities, deferred inflows, and fund balances
(in thousands ofdollars)
Construction Fund
2017 2016 2017
S 1,175 $ 2,927 $ 1,415
12,055 5,003 17,014
14,503 12,524 18,455
— — 79
15,702 12,814 39,426
746 — —
$ 44,181 $ 33,268 $ 76,389
$ 3,171 $ 3,368 $ 1,715
— — 10l_
3,171 3,368 1,816
13,110 10,015 32,918 13,110 10,015 32,918
S — S — S 79
22,204 22,071 37.509
5,696 — 4,146
—_ (2,186) (79)
27,900 19,885 41,655
$ 44,181 S 33,268 $ 76,389
2016 2017 2016
$ 2,154 S 2,590 S 5,081
— 29,069 5,003
18,836 32,958 31,360|109|79|910|33,051 55,128 45,865
— 746 _
$ 54,042 S 120,570 $ 87,310
$ 2,062 S 4.886 S 5,430
101 101 KH_
2,163 4,9S7 5,531
25,834 46,028 35,849 25,834 46.028 35,849
S I $ 79 S I
— 59,713 22,071
37,384 9,842 37,384
(11,339) (79) (13,525)
26,045 69.555 45,930
$ 54,042 S 120.570 S 87.310
126 FINANCIAL SECTION
Exhibit B-2
Combining Statements of Revenue, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds
Year ended December 31, 2017
(widi comparative amounts for prior year)
(in thousands ofdollars)
Stormwater Total Nonma jor
Management Fund Governmental Funds
Revenues
Revenues:
Property taxes Interest on investments Fees, forfeits and penalties User charge
Claims and damage settlements Miscellaneous Total revenues
2016
12,995 $ 15,193 326 285 1,486 746
16,267
43
14,807
2017
32,555 360
32.944
2016
27,308 270
27,578
2016
45,550 $ 42,501 686 555 1,486 746
43
43,845
10 19
47,751
Expenditures
Current Operations: Construction costs Total expenditures
Revenues over (under) expenditures
Other financing sources (uses):
Transfer out to Debt Service Fund
Total other financing sources (uses)
Revenues over (under) expenditures and other financing uses
Fund balances
Beginning ofthe year
End ofthe year
13,792 21,088 14,065
13.792 21.088 14,065
1,015 (4,821) 18,879
7,000 -_ (3,269)
7,000 — (3.269)
8,015 (4,821) 15,610
19.885 24.706 26.045
$ 27,900 $ 19,885 S 41,655
26,386 27,857 47,474
26.386 27,857 47,474
1,192 19,894 (3,629)
(3,273) 3,731 (3.273)
(3,273) JjT\ (3,273)
(2,081) 23,625 (6,902)
28,126 45,930 52,832 S 26,045 S 69,555 $ 45,930
FINANCIAL SECTION 127
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GENERAL CORPORATE FUND
A fund used to account for an annual property tax levy and certain other revenues, which are to be used for the operations and payments of general expenditures of the District not specifically chargeable to other funds.
Exhibit C-1
General Corporate Fund - Corporate and Reserve Claim Divisions Schedule of Appropriations and Expenditures on a Budgetary Basis
Year ended December 31, 2017
Corporate Division
Board of Commissioners: Personal services
Salaries of regular employees Compensation plan adjustments Social security and medicare contributions Tuition and training payments Personal services not otherwise classified Total personal services
Contractual services Travel
Meals and lodging Subscriptions and membership dues Payment for professional services Contractual services not otherwise classified Total contractual services
Materials and supplies
Office, printing, and photographic supplies Total materials and supplies Board of Commissioners total
General Administration: Personal services
Salaries of regular employees Compensation plan adjustments Social security and medicare contributions Salaries of non-budgeted employees Tuition and training payments Total personal services
Contractual services Travel
Meals and lodging
Postage, freight, and delivery charges Compensation for personally owned autos Motor vehicle operating services Reprographic services Electrical energy Natural gas
Water and water services Communication services Subscriptions and membership dues Rental charges Advertising
(in thousands of dollars)
Original
Budget Amounts
Net Transfer
— $
3,621 34 85 20 428
4,188
(10)
10
10 20 36 1 231
1_
298
10_
10_
4,496
(14)
10,855 951 150
97_
12,053
(14)
10 17 95 4 84 121 365 35 6
778 18 13
Actual Amounts
3,422 11 77 16 309
3,835
10 35 179
232
4,073
10,215 782 154 1
81
11,233
97
68 1 16 318 26 5 3
686 14 12
Actual Variance
with Final Budget -Positive
(Negative)
199 23 8 4
119
353
62
66
423
626 169 9
16
820
2 5
16 5
33 9 I
130 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
Corporate Division
General Administration (continued):
Administration building operation Administration building operation annex Payment for professional services Contractual services not otherwise classified Repairs to buildings
Repairs to office furniture and equipment Communication equipment maintenance Repairs to vehicle equipment Total contractual services
Materials and supplies Electrical parts and supplies Plumbing accessories and supplies Hardware
Office, printing, and photographic supplies Cleaning supplies Wearing apparel
Materials and supplies not otherwise classified Total materials and supplies General Administration total
Monitoring and Research: Personal services
Salaries of regular employees Compensation plan adjustments Social security and medicare contributions Salaries of non-budgeted employees Tuition and training payments Total personal services
Contractual services Travel
Meals and lodging
Postage, freight, and delivery charges Compensation for personally owned autos Reprographic services Rental charges
Governmental services charges Payment for professional services Contractual services not otherwise classified Repairs to marine equipment
Repairs to testing and laboratory equipment Total contractual services
Actual Variance with Final Budget -
Positive (Negative)
(in thousands ofdollars)
Actual Amounts
Original
Pinal
Budget Amounts
1,129 842 468 340 65 110 18 538 5,047
1,015 737 408 .¦ 235 22 90 18 384 4,276
114 105 60 105 43 20
154 771
Net Transfer
10 104 (102)
1,119 $ 738 570 340 65 410 18
538
5,0471
17 — 17 9|910|30 (10) 20 12|910|17 — 17 17 —
132 10 142 112 30
2—21|910|30 — 30 24|910| 59 — 59 45 14_
287 -- 287 220 67
17.387 — 17.387 15,729 1,658
27,752 (200) 27,552 26,104 1,448
688 128 816 804 12
377 — 377 368 9|109|54 59 57 2
55 IS 73 66|910
10|27
15 32
6 26
I
4 17 329 511 51 421
28,877 — 28,877 27,399 1,478
15 29
5 25|1010|17 93
234 27
352
I
(1) (4)
277 24 69
70?
621
1,413
4 17 330 515 51 421
1.413
FINANCIAL SECTION 131
Exhibit C-1 (continued)
General Corporate Fund - Corporate and Reserve Claim Divisions Schedule of Appropriations and Expenditures on a Budgetary Basis
Year ended December 31, 2017
Corporate Division
Monitoring and Research (continued): Materials and supplies
Office, printing, and photographic supplies Farming supplies
Laboratory testing supplies and small equipment
Wearing apparel
Books, maps, and charts
Computer supplies
Fuel
Materials and supplies not otherwise classified Total materials and supplies
Machinery and equipment
Testing and laboratory equipment Total machinery and equipment Monitoring and Research total
Procurement and Materials Management: Personal services
Salaries of regular employees Compensation plan adjustments Social security and medicare contributions Tuition and training payments Total personal services
Contractual services Travel
Meals and lodging
Compensation for personally owned autos
Advertising
Repairs to buildings
Repairs to office furniture and equipment Repairs to vehicle equipment Total contractual services
Materials and supplies Metals
Electrical parts and supplies Plumbing accessories and supplies I htrdware
Buildings, grounds, paving materials, and supplies Fiber, paper and insulation materials Paints, .solvents, and related materials Vehicle parts and supplies
(in thousands ofdollars)
Original
Budget Amounts
Net Transfer
(1) $|1010|(1)
25 34 406 16 1
2 15 58
557
423
423
31,270
5,555 141
79
5_
5.780
3 3 2
(6)
131 4
153
(21) (12) (31)
(2)|1010|
150 350 382 85 350 45 55 10
Final
24 34 406 16 3 1
15 58
557
423
423
31,270
5,555 141 79 5
5.780
2 125 6|10 10|12
153
129 338 351
85 348
47
10
Actual Amounts
24 . 34 348 15 2
12 45
480
419
419
29,090
5,119 63 72 I
5,255
97
123 301 305 78 303 4b 51 9
Actual Variance with Final Budget -Positive (Negative)
58 1 1 1 3 13 77
|1010|2,180
436 78 7
4_
525
3 3 I
43
56
6 37 46
7 45
I
4 1
132 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
Corporate Division
Procurement and Materials Management (continued): Mechanical and repair parts Office, printing, and photographic supplies Laboratory testing supplies and small equipment Cleaning supplies Tools and supplies Wearing apparel Safety and medical supplies Computer supplies Fuel
Gas (in containers) Communications supplies Lubricants
Materials and supplies not otherwise classified Total materials and supplies
Procurement and Materials Management total
Human Resources: Personal services
Salaries of regular employees Compensation plan adjustments Social security and medicare contributions Employee claims Tuition and training payments Health and life insurance premiums Personal services not otherwise classified Total personal services
Contractual services Travel
Meals and lodging
Postage, freight, and delivery charges Compensation for personally owned autos Court reporting services Medical services Insurance premiums Rental charges
Payment for professional services Contractual services not otherwise classified Safely repairs services Computer software maintenance Total contractual services
(in thousands ofdollars)
Budget Amounts
Net Transfer
40 31 20
Original
$ 160 17
590
300 80
(50) 21
173 90 77
270 65 8
(20)
20
(232) (24) 256
260 117 3,634 9,567
7,492 238 101 60 742 46.705 251 55,589
45
(40) (5)
4 14 124 3.500 24 1,139 63 172 20
5.077
Final
200 17 621 300 100 173 90 77 220 86 8
260 119
3,634
9.567
7,472 238 121 60 510 46.681 507 55,589
4 14 124 3.500 24 1,184 63 132 15
5.077
Actual Amounts
195 14
621
293 99
172 88 67
181 76 8
227 117 3,374 8,726
5,591 200 115 22 492 42,902 359
49,681
I
7 90 3.058 8
1,041 55 60
4.330
Actual Variance with Final Budget -
Positive (Negative)
5 3
7 1 1
2 10 39 10
33 2
260 841
1,881 38 6 38 18
3.779 148
5,908
3 4
3 7 34 442 16 143 8 72 15 747
FINANCIAL SECTION 133
Exhibit C-1 (continued)
General Corporate Fund - Corporate and Reserve Claim Divisions Schedule of Appropriations and Expenditures on a Budgetary Basis
Year ended December 31, 2017
Corporate Division
Human Resources (continued): Materials and supplies
Office, printing, and photographic supplies Books, maps, and charts Safety medical supplies
Materials and supplies not otherwise classified Total materials and supplies Human Resources total
Information Technology: Personal services
Salaries of regular employees Compensation plan adjustments Social security and medicare contributions Tuition and training payments Total personal services
Contractual services Meals and lodging
Postage, freight, and delivery charges Compensation for personally owned aulos Communication services Rental charges
Payment for professional services Contractual services not otherwise classified Computer equipment maintenance Computer software maintenance Communication equipment maintenance Total contractual services
Materials and supplies
Office, printing, and photographic supplies Computer software Computer supplies Communication supplies
Total materials and supplies
Machinery and equipment Computer equipment Computer software
Total machinery and equipment Information Technolouv total
(m thousands of dollars)
Original
Budget Amounts
Net Transfer
9 $
59 3
(9)
173
4_
239 60,905
(4)
8,588 236 107
87_
9,018
|1010|1,422 326 357 20 376
(1.)
4.058 796
7,362
17 332 423 132 904
45
30_
75 17,359
Final
68 3
164 4
239
60.905
8,584 236 111 87
9,018
|101010|1,422 326 357 20 376
4,058 795
7,362
17 332 423 132
904
45 30
75
17.359
Actual Amounts
61 2
95 3
161
54,172
7,504 185 106 32
7,827
1 I 1
948 294 100
237 3,840 684
6,106
10 77 410 90
587
37
14.557
Actual Variance
with Final Budget -Positive
(Negative)
7 I
69 1
78_
6,733
1,080 51
55_
1,191
|1010|474 32 257 20 139 21S 111 1,256
|1010|255 13 42
317
8 30 38 2.802
134 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
Corporate Division
Law:
Personal services
Salaries of regular employees Compensation plan adjustments Social security and medicare contributions Tuition and training payments Total personal services
Contractual services Travel
Meals and lodging
Postage, freight, and delivery charges Compensation for personally owned autos Reprographic services Court reporting services Payment for professional services Contractual services not otherwise classified Total contractual services
Materials and supplies
Office, printing, and photographic supplies Books, maps, and charts Materials and supplies not otherwise classified Total materials and supplies
Fixed and other charges Taxes on real estate
Total fixed and other charges Law total
Finance:
Personal services
Salaries of regular employees Compensation plan adjustments Social security and medicare contributions Tuition and training payments Total personal services
Contractual services Travel
Meals and lodging
Compensation for personally owned autos Reprographic services Court reporting services Payments for professional services
(in thousands ofdollars)
Met Transfer
Original
Final
Budget Amounts
5,045 $ 143 66 14
Actual Amounts
112 67
(4) $ 5,041 $ 4,683
4,873
5,268
143 70 14
4 9
4 2
10 238 82
5,268
6 12 1|1010|(10)
25 80 2,000 90
2,210
349
6 25 70 2.000 90|1010
10|18
2,210
686
890
IS
890
686
890
8.386
5,921
890
3,053 21 43 30
3.133 60 51 31
8,386
3.147
3,275
3,133 60 51 26
(3.) (2)
59 304
59 313|10 10|(11)
3,270
50 324
Actual Variance
with Final Budget -Positive
(Negative)
358 31 3
3_
395
2 3 1
2 23 60 1.762
S_
1,861
2 2 1
204 204 2.465
80 39 8 I
128
FINANCIAL SECTION 135
Exhibit C-1 (continued)
General Corporate Fund - Corporate and Reserve Claim Divisions Schedule of Appropriations and Expenditures on a Budgetary Basis
Year ended December 31, 2017
Corporate Division
Finance (continued):
Contractual services not otherwise classified Repairs to office furniture and equipment Total contractual services
Materials and supplies
Office, printing, and photographic supplies Books, maps, and charts
Total materials and supplies Finance total
Engineering:
Personal services
Salaries of regular employees Compensation plan adjustments Social security and medicare contributions Tuition and training payments Total personal services
Contractual services Travel
Meals and lodging
Postage, freight, and delivery charges Compensation for personally owned autos Motor vehicle operating services Reprographic services Water and water services Rental charges
Payments for professional services Preliminary engineering reports and studies Contractual services not otherwise classified Repairs to waterway facilities Repairs to testing and laboratory equipment Repairs not otherwise classified Total contractual services
Materials and supplies
Office, printing, and photographic supplies Tools and supplies Wearing apparel Books, maps, and charts Materials and supplies not otherwise classified Total materials and supplies Entunccrini! total
(in thousands of dollars)
Budget Amounts
Net Transfer
Original
(5)
$ 1 5
394
19 1
20
3,684
27,176 591 375 150
28,292
12 25 3 15
|1010|(1)
238 27 85 43 5
10_
473
40 10 8 7 5
70 28,835
Actual Variance with Final Budget -Positive (Negative)
1 $
17 9
1_
10 155
2.337 197 24 49 2,607
.9|1010|7 1 1
|1010|0<)
13 3
2 145
7 6 I|1010|
774
136 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
Corporate Division
Maintenance and Operations: Personal services
Salaries of regular employees Compensation plan adjustments Social security and medicare contributions Salaries of non-budgeted employees Tuition and training payments Total personal services
Contractual services Travel
Meals and lodging
Compensation for personally owned autos Motor vehicle operating services Electrical energy Natural gas
Water and water services Communications services Testing and inspection services Rental charges
Governmental service charges
Maintenance of grounds and pavements
Payments for professional services
Contractual services not otherwise classified
Waste material disposal charges
Farming services
Sludge disposal
Repairs to collection facilities
Repairs to waterway facilities
Repairs to process facilities
Repairs to railroads
Repairs to buildings
Repairs lo material handling and farm equipment Safety repairs and services Repairs to marine equipment Computer software maintenance Repairs lo vehicle equipment Repairs not otherwise classified Total contractual services
Materials and supplies Metals
Electrical parts and supplies
(in thousands of dollars)
Original
Budget Amounts
Net Transfer
(305) 280 26
87,956 4,662 1,228 35 266 94,147
(13)
(225) 238 125
35 70 150 2
266 (87)
(23) (47)
(209) 446
(104)
(185) (18) (109)
(70)
23 (9)
36,447 2,768 1,741 605 170 180 3,300 968 720 570 10,955 233 3,204 3,333 50 4,976 303 1,050 304 368 60 5
(I)
100
20_
72,687
330
35 1,800
Final
87,651 . 4,942 1,254 35 266 94,148
35 70 137 2
36,222 3,006 1,866 605 170 180 3,566 881 720 547 10,908 24 3,650 3 229 50 4,791 285 941 304 208 60 5
123 1 I
72,686
35 2.130
Actual Amounts
85,102 4,714 1,250 7
198 91,271
15 58 109 I
35,900 2,928 1,859 554 119 156 3,560 829 544 404 10,285 25 3,600 3,076 44 4,648 267 612 280 280 54 5
1 15 9
70,336
28 1,751
Actual Variance
with Final Budget -Positive
(Negative)
2,549 228 4 28
68_
2,877
20 12 28 1
322 78 7 51 51 24 6 52
176
143
623 (1) 50
153 6
143 18
329 24 18 6
2,350 7
379
FINANCIAL SECTION 137
Exhibit C-1 (continued)
General Corporate Fund - Corporate and Reserve Claim Divisions Schedule of Appropriations and Expenditures on a Budgetary Basis
Year ended December 31, 2017
Corporate Division
Maintenance and Operations (continued): Plumbing accessories and supplies Hardware
Buildings, grounds, paving materials, and supplies
Tiber, paper and insulation materials
Paints, solvents, and related materials
Vehicle parts and supplies
Mechanical repair parts
Manhole materials
Office, printing, and photographic supplies Farming supplies Processing chemicals
Laboratory testing supplies and small equipment
Cleaning supplies
Tools and supplies
Wearing apparel
Safety.and medical supplies
Computer software
Computer supplies
Fuel
Gas (in containers) Communication supplies Lubricants
Materials'and supplies not otherwise classified Total materials and supplies
Machinery and equipment
Equipment for collection facilities Equipment for process facilities Vehicle equipment Testing and laboratory equipment Total machinery and equipment Maintenance and Operations total
(in thousands ofdollars)
Budget Amounts
Net Transfer
Original
S 652 20 193 14 7
285
200 2,288 11 50 5
(543)
13,724 25 5
(65)
500 2 60 8 17 300 5 I|1010|(5) 15 (10)
108 20,035
50 100 10
6_
166 187,035
Final
642 20
193 14 7
200 2,573 11 50 5
13,181 25 5
435 2
60 8 17 300 5 1
S
108
20,035
45 1 15
166
187,035
Actual Amounts
520 15
126 6 5
168 2,203 TO 43 5
9,135 23 4
376 1
43 4 11 255
7 59 14,799
45 109
160 176.566
Actual Variance
with Final Budget -Positive
(Negative)
$ 122 5 67 8 2
32 370
4,046 2 1
59 1
17 4 6
45 4 I I
49 5,236
10.469
138 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
Corporate Division
Corporate Division Total
Total all departments' Personal services Contractual services Materials and supplies Machinery and equipment Fixed and other charges
Total Corporate Division
Reserve Claim Division
Employee claims
General claims and emergency repair and replacement cost over SI0,000
Total Reserve Claim Division Total General Corporate Fund
Actual Variance
with Final Budget -Positive
(Negative)
(in thousands ofdollars)
Actual Amounts
Original
Final
Budget Amounts
Net Transfer
6 $ 246,488 $ 230,206 :$ 16,282
7,890 6,076 48 204.
(6) 95,108
— 25,774
664
890
87,218 19,698 616 686 338,424
$ 246,482 $ 95,114 25,774
664
30,500
3,766 19,946
368,924
8,000
22,617 30,617
890
4,234
2,671 6,905
368,924
8,000
23,712
22,617 30,617 ~ $ 399,541 $
$ 399,541 $ 345,329 $ 54,2
FINANCIAL SECTION 139
Exhibit C-2
General Corporate Fund - Corporate and Reserve Claim Divisions Schedule of Expenditures by Type - GAAP Basis
Year ended December 31. 2017
(with comparative amounts for prior year) ,
Personal services: Salaries and wages
Employee health and lite insurance premiums Social security and medicare contributions Tuition and training payments Other
Total personal services Contractual services: Electrical energy Natural gas
Postage, freight, and delivery charges Waste material disposal charges Administration building operation Communication services Farming services Court reporting services Water and water services Motor vehicle operating services Employee travel and transportation Medical services Rental charges
Maintenance of grounds and pavements Governmental service charges Repairs to process facilities Other repairs
Other contractual services
Total contractual services Materials and supplies: Processing chemicals Laboratory testing supplies Mechanical repair parts Fuels and lubricants Electrical parts and supplies Plumbing accessories and supplies Office, printing, and photographic supplies Buildings, grounds, paving materials, and supplies Cleaning supplies Metals
Computer supplies
Other materials anil supplies
Total materials and supplies leoiuinued)
(m thousands ofdollars) 2017 2016
S 183,651 42,901 2,602 1,028 22
230,204
36,219 2,954 105 10,285 1,752 1,506 25 77 1,869 69 352 90 473 829 3,577 4,648 8,516 11,889 85,235
9,137 984
2,917 802
1,886 924 319 367 279 130 651
1,893 20.289
Increase (Decrease)
2,260 (323) 74 298 (17)
2,292
504 533 1
1,025 61 (266)
(5) 14 (35) 11
(93) (32) (37) 20 336 (607) (2.211) (1,094)
(1,875)
(619) 14 709 133 (151) (369) 24 91 19 (23) 195 (862)
(839)
Percent
Increase
(Decrease)
%
(1) 3
41
(44) 1|1010|22
1 11|1010|(15) (17) 22 (2) 19 (21) (26) (7) 2
10 (12) (21)
(S) (2)
(6) 1
32 20 (7) (29)
8 33|1010|(15.)
43 (31)
(4)
Percent of Total 2017
53% 13
0 0 67
11 1
0 3 1
0 0 0 1
0 0 0 0 0 1 I
3 3
~
3 0 I
0 I
0 0 0 0 0 0 I
140 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
Percent Percent
Increase Increase of Total
2017 2016 (Decrease) (Decrease) 2017
Machinery and equipment:
Vehicle equipment S — $ 5 S (5) (100)% 0%
Testing and laboratory equipment 424 312 112 36|9 10|Equipment for collection facilities 23 36 (13) (36)|9 10|Communication equipment — 45 (45) (100)|9 10|Other machinery and equipment 284 280 4|99 10|Total machinery and equipment 731 678 53|99 10|Fixed other charges:
Taxes on real estate 686 790 (104) (13)|9 10|Total fixed other charges 686 790 (104) (13)|9 10|Claims and judgments 6,905 4,786 2,119 44|910|Total expenditures S 344,050 $ 342.404" $ 1,646 100%
FINANCIAL SECTION 141
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DEBT SERVICE FUND
Fund established to account for annual property tax levies and certain other revenues, principally interest on investments, which are used for payments of interest and redemption of general obligation bond issues.
Exhibit D-1
Debt Service Fund
Schedule of Revenues, Expenditures and Changes in Fund Balances Including Comparison of Budget and Actual on Budgetary Basis
Year ended December 31, 2017
(in thousands ofdollars)
Revenues:
Property taxes
Total tax revenue
Actual Variance
Actual on Budgetary Basis
Final Budget
with Final Budget -Positive
(Negative)
222,973
218,405
$ 222,973 $ 218,405 $ (4,568)
' (4,568)
Interest on investments Miscellaneous
Total revenues
1,346 10
219,761
946 10
(3,612)
Expenditures:
Debt service Revenues over (under) expenditures
Other financing sources (uses): Transfers from Stormwater Fund
Total other financing sources (uses)
Revenues and Other financing (use) over (under) expenditures
Fund balances at beginning of year Fund balances at end of the year
(5.796) 178.312
$ 118,423 $ 172.516 $
(6,112) 60,205
54,093
144 FINANCIAL SECTION
CAPITAL PROJECTS FUNDS
Construction Fund
Fund established to account for proceeds of annual property tax levies and certain other revenues used for the acquisition of long-term assets used in principal functions ofthe District.
Stormwater Management Fund
Fund established to account for the annual property taxes which are specifically levied to finance all activities associated with stormwater management, including construction projects.
Capital Improvements Bond Fund
Fund established to account for proceeds of debt, government grants, and certain other revenues used in connection with improvements, replacements, and additions to designated environmental projects.
Exhibit E-1
Capital Project Funds
Schedule of Appropriations and Expenditures on Budgetary Basis
Year ended December 31, 2017
Construction Fund:
Contractual services
Testing and Inspection Services Intergovernmental Agreements Payments for professional services Professional engineering services for construction Contractual services not otherwise classified Repairs to collection facilities Total contractual services
(m dumsands of dollars)
Original
Budget Amounts
Net Transfers
100
600 S (250) $ 100 —
3,625
1,859 60 157
150
6,401
Actual Amounts
43 $
82 1,651
29 285
350 $
2,090
100 3,725 1,859 60 . 307
6,401
Machinery and equipment
Equipment for colocation facilities 340 — 340 — 340
Equipment for waterway facilities 335 — 335 202 133
Equipment for process facilities 1,996 — 1.996 308 1,688
Computer equipment 274 — 274 241 33
Computer software 132 — 132 35 97
Communications equipment 71 — 71 67|910|Vehicle equipment 2,072 — 2,072 1,883 189
Machinery and equipment not otherwise classified 1,404 — 1,404 139 1,265
Total machinery and equipment 6,624 — 6,624 2,875 3,749
Capital Projects
Collection facilities structures 2,469 (300) 2,169 950 1,219
Waterway facilities structures 349 — 349 — 349
Process facility structures 5,329 — 5,329 1,021 4,308
Buildings • 2,767 — 2,767 850 1,917
Capital projects not otherwise classified 3.738 — 3,738 3,066 672
Preservation of collection facility structures 1,500 — 1.500 — 1.500
Preservation of waterway facility structures 931 931 — 931
Preservation of process facility structures 1,486 428 1,914 618 1.296
Preservation of buildings 2.484 -¦¦ 2,484 2.322 162
Preservation capital projects not otherwise classified 373 (128) 245 — 245
Total capital projects 21.426 — 21.426 8,827 12.599
Construction Fund Summary:
Contractual services 6.401 — 6,401 2,090 4,311
Machinery and equipment 6.624 — 6,624 2.875 3.749
Capital projects 21,426 — 21,426 8,827 12.599
Construction Fund total 34.451 — 34.451 13,792 20.659
11 inuinuedj
146 FINANCIAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
(in thousands of dollars)
Budget Amounts
Net Actual Original Transfers Final Amounts
Actual Variance with Final Budget -Positive (Negative)
Stormwater Management Fund:
Personal services
Salaries of regular employees Compensation plan adjustments Social security and medicare contributions Salaries of nonbudgctcd employees Tuition and training payments Health and life insurance premiums Total personal services
Contractual services Travel
Meals and lodging
Postage, freight and delivery charges
Compensation for personally owned autos
Motor vehicle operating services
Testing and inspection services
Court reporting services
Rental charges
Intragovernmental agreements Payments for professional services Preliminary engineering reports and studies Professional engineering services for construction Contractual services not otherwise classified Waste material disposal charges Repairs to waterways facilities Computer Software Repairs not otherwise classified Total contractual services
Materials and supplies
Building and grounds materials and supplies Office, printing, and photo supplies Processing chemicals Tools and supplies Wearing apparel
Materials and supplies not otherwise classified Total materials and supplies
(continued)
$ 5,635 S — $ 5,635 S 5,370 $ 265
193 — 193 108 85
81 — 81 77 4
11 — 11 — 11
31 — 31 9 22
580 — 580 502 78
6,531 — 6,531 6,066 465
2 |999|—
5—54|9109|—|99910|25 — 25 15 10|109|—|99|—|910|30 — 30 — 30
12 — 12 11 I|109|—|99910|12,846 — 12,846 2,546 10,300
775 — 775 , 227 548
4,800 — 4,800 1,097 3,703
3,844 (150) 3,694 116 3,578
246 — 246 163 83
70 . — 70 54 16
2,415 — 2.415 2,251 164
— 150 150 150 —
|999|I 5_
25,083 — 25,083 6,639 18,444
8 5
i
804
5—55
12 — 12|9109|— '5 —
,11 — 11|910|"i o
1.240 — 1,240 436
,1.275 — 1,275 453 822
FINANCIAL SECTION 147
Exhibit E-1 (continued) Capital Project Funds
Schedule of Appropriations and Expenditures on Budgetary Basis
Year ended December 31, 2017
Stormwater Management Fund (continued):
Machinery and equipment Marine equipment
Total machinery and equipment
(in thousands of dollars)
Budget Amounts Net
Original Transfers
85 S
85
Actual Variance
with Final Budget -Positive
85 85
(Negative)
— $
Capital Projects
Waterways facilities structure Capital projects not otherwise classified Preservation of waterway facility structures Total capital projects
3,170 1,620 1,459 6,249
3,170 1,620 1,459 6,249
2,208 1,620 1,459 5,2S7
Land Land
410 410
410 410
410 410
Fixed and other charges
Equity transfer 5,769 — 5,769 3,269 2,500
Payments for easements 400 — 400 14 386
Total fixed and other charges 6,169 — 6,169 3,283 2,886
Stormwater Management Fund Summary:
Personal services 6,531 —¦ 6,531 6,066 465
Contractual services 25,083 — 25.083 6.639 18,444
Materials and supplies 1,275 — 1,275 453 822
Machinery and equipment S5 — 85 — 85
Capital projects 6,249 — 6,249 962 5,287
Land 410 — 410 — 410
Fixed and other charges 6,169 --_ 6,169 3,283 2,886
Stormwater Management Fund total 45,802 — 45,802 17,403 28,399
Capital Improvements Bond Fund Summary:
Contractual services Machinery and Equipment Capital projects Land
Fixed and other charges
Capital Improvements Bond Fund total * Capital Projects Funds total
20.055
313.054 10,300 2,216 354,625
55,640 1,245 466.398 10,300 6,606 540.189
S 434.878 S 185.564 S 620,442 S 276,223 S 344,219
* The Capital Improvements Bond Fund is budgeted on an "obligation" basis which records expenditures in the period in which the contracts or giants arc awarded.
148 FINANCIAL SECTION
TRUST FUNDS
PENSION TRUST FUND
A fiduciary fund established to account for employer / employee contributions, investment earnings, and expenses for employee pensions.
OPEB TRUST FUND
Fund established to administer the defined benefit post-employment health care plan.
Exhibit F-1
Pension and Other Post Employment Trust Funds Combing Statements of Fiduciary Net Position
Year ended December 31, 2017
(with comparative amounts for prior year)
(in thousands ofdollars)
Total Fiduciary Funds
Assets Cash
Receivables
Employer contributions-taxes (net of allowance tor uncollectible S3,883 in 2017; $3,753 in 2016)
Securities sold
Forward foreign exchange contracts Accrued interest and dividends Accounts receivable Total receivables
2017
,990
89,604 42,172 123,333 3,660 43
258,812
2016
3,670 S
79,505 7,563 116,576 3,161 45
206,850
2017
1,990 $
89,604 42,172 123,333 3,733
43
258,885
2016
3,670
79,505 7,563 116,576 3,237 45
206,926
Investments at fair value
Corporate and governmental bonds and notes
Money market funds Pooled funds - fixed income Pooled funds - equities Balanced funds Common and preferred stocks Mutual and commingled Equity funds Short-term investments Total investments
234,275
195,104
249,81:
184,200
576,588 524,405 342,484 285,515 30,689 32,493
,383,773 1,271.792
16,994 62,805 97,893 17,449
195.141
5,590 61,360 81,809 16,013
164,772
249,812 16,994
247,005 97,893 17,449
576,588
342,484 30,689 1,578,914
234,275 5,590 256,464 81,809 16,013 524,405 285,515 32,493 1,436.564
Securities lending capital Total assets
Liabilities
Accounts payable 1,360 1,270
Securities lending collateral 27,448 42,118
Forward foreign exchange contracts 124,384 1 16,937
Securities purchased 17,037 11,507
Total liabilities 170,229 171.832
1,374 27,448
124,384 17,037
170,243
1,274 42.1 18 116.937 11,507
171.836
S 1,501.794 $ 1.352,598 S 195.200 S 164.844 S 1.696,994 S 1.517.442
150 FINANCIAL SECTION
Exhibit F-2
Pension and Other Post Employment Trust Funds Combining Statements of Changes in Fiduciary Net Position
Year ended December 31, 2017
(widi comparative amounts for prior year)
(in thousands ofdollars)
Total Fiduciary Funds
Additions:
Contributions:
Employer contributions
Employee contributions
Retiree contributions
Total contributions
Investment income:
Net appreciation (depreciation) in fair value of investments
Interest and dividend income
Total investment income (loss)
Less investment expenses
Investment income (loss) net of expenses
Security lending activities:
Security lending income
Borrower rebates
Bank fees
Net income from securities lending activities
Other
Total additions
2016
80,260 20.831
2017
101.091
89,858 S 20,840
92,763 25,003
110,698
177,342 21,754
199.096 117,766 (4,621) (4.614)
194,475
448
(13)
(89)
113.152
346
265 295 (126)
434
305,522
107
214.784
2017
2016
S 18,431 S 19,917 $
18,431
7,917
6,577 4,013
27,834
10,590 (42)
21,209 4,225
10,548
25.434 (42)
38,382
25,392
43,823
2017
2016
128,925
99,340 29.016 128,356 (4,656)
123,700
265 295 (126)
108,289 $ 100,177 20,840 20,831 — 7,917
129,129
198,551 25,979
224,530 (4,663)
219,867
434
448
(.13)
(89)
107
346
253,166
3_
349.345
Deductions: Annuities and benefits Employee annuitants Retiree health care benefits Surviving spouse annuitants Child annuitants Ordinary disability benefits Duty disability benefits Total annuities and benefits Refunds of employee contributions Administrative expenses ' Total deductions
127.099
24.203 142 631
77_
152,152 2,560 1.614 156.32b
121.730
22.919 153 413 1 10 145.325 2.01 1 1.503 148.839
127,099 13,431 24,203 142 631
77_
165,583 2,560 1,65 i 169,794
121,730 22.835 22.919 153 413 110
168.160 2.011 1,535
171.706
Net increase (decrease)
Net position held in trust for pension and OPEB benefits
Beginning of year
End of year
FINANCIAL SECTION 151
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III.
STATISTICAL AND DEMOGRAPHICS
SECTION
MWRD President Mariyana T. Spyropoulos and Commissioner Josina Morita were joined by MWRD stuff after receiving awards at the 2017 WEFTEC Awards Ceremony in Chicago. Three awards were presented to the MWRD for Water Quality Improvement, Project Excellence and Innovative Facility Design. Appearing left to right, Principal Civil Engineer Yvonne Lefler, Managing Civil Engineer Kevin Eit-patrick, Commissioner Morita, Associate Civil Engineer Meagan Mafias, President Spyropolous, Principal Civil Engineer Justine Skawski, Principal Civil Engineer Lou Storino, Assistant Director of Engineering Rill Sheriff and Senior Civil Engineer liipin Patel.
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Statistical and Demographics Section (Unaudited)
T his part of the District's comprehensive annual financial report presents detailed information as a context for understanding the information in the financial statements, note disclosures, and required supplementary information and the District's overall financial health.
Contents Exhibits
Financial Trends 1-1 through 1-4
These schedules contain trend infonnation to help the reader understand how the District's financial performance and well-being have changed over time.
Revenue Capacity 1-5 through 1-9
These schedules contain information to help the reader assess the District's most significant local revenue sources, properly taxes and user charges.
Debt Capacity 1-10 through 1-12
These schedules present information to help the reader assess the affordability of the District's current levels of outstanding debt and its ability to issue additional debt in the future.
Demographic and Economic Information 1-13 and 1-14
These schedules offer demographic and economic indicators to help the reader understand the environment within which the District's financial activities take place.
Operating Information 1-15 through 1-17
These schedules contain service and infrastructure data to help the reader understand how the information in this financial report relates to the services the District provides and the activities it performs.
Sources: Unless otherwise noted the information in these schedules is derived from the comprehensive annual financial reports for die relevant year.
STATISTICAL SECTION 155
Exhibit 1-1
Net Position by Component
Last Ten Fiscal Yean
(accrual basis of accounting)
(in thousands ofdollars)
2017 2016 2015 2014
Net investment in capital assets * $ 4,710,123 $ 4,591,899 S 4,630,463 S 4,548,793
Restricted
Restricted for corporate working cash 280,437 279,390 278,852 278,148
Restricted for reserve claim 9,976 2,128 6,499 7,764
Restricted for debt service 318,646 318,575 310,383 305,375
Restricted for capital projects 32,067 75,762 — 15,457
Restricted for construction working cash 22,204 22,070 21,947 21,833
Restricted for stormwater working cash 37,509 37,384 37,216 37,035
Unrestricted (Deficit) , (794,533) (787,263) (756,154) (722,949)
Total net position $ 4,616,429 $ 4,539,945 $ 4,529,206 $ 4,491,456
* Infrastructure under the modified approach is reported in the period the initial condition assessment was completed.
156 STATISTICAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
2010
S 4,506,950 $ 4,514,633 S 4,506,544 $ 4,492,811 $ 4,559,884 $ 4,575,974
276,894 9,861
278,970 28,886 21,644 37,690
277,006 4,524
268,760 18,828 2h649 37,737
277,270 6,211
257,418 29,908 21,611 39,573
277,249 22,521
227,320 38,018 27,377 39.554
275,459 25,073 232,815
27,286 38,953
272,120 35,817
212,353 13,412 27,005 37,902
(49,191)
S 5,164,932 $ 5,142,131 S 5,085,058 $ 5,027,916 $ 5,110,279 $ 5,221,899
STATISTICAL SECTION 157
Exhibit 1-2
Changes in Net Position
Last Ten Fiscal Years
(accrual basis of accounting)
(in thousands of dollars)
Revenues
General Revenues: Property taxes
Personal property replacement tax
Interest on investments
Tax increment financing distributions
Claims and damage settlements
Miscellaneous
Gain on sale of capital assets Total general revenues Program Revenues: Charges for services User charges Land rentals
Fees, forfeits and penalties Capital grants and contributions
Federal grants
Total program revenues Total revenues Expenses Board of Commissioners General Administration Monitoring and Research Procurement and Materials Management Human Resources Information Technology Law Finance Engineering
Maintenance and Operations Pension costs OPEB Trust Fund costs * Claims and judgments Construction costs Loss on sale of capital assets Depreciation (unallocated) Interest on bonds . Total expenses Change in Net Position
2017
563,764 43,194 8,784 9,100 783 5,819 50
631,494
51,098 17,352 5,401
14,558
88,409
719,903
4,094 15,791 29,591 5,947 54,267 12,734 5,830 3,520 27,830 178,994 106,814 (6,681) (2,662) 85,535 202 12,063 109.550
643.419
76.484
2016
556,648 38,961 6,181 9,228 209 5,527 1,210
617,964
48,621 20,166 4,164
12,825
85,776
703,740
4,166 15,690 28,753 6,602 54,447 14,702 6,709 3,570 28,002 177,829 108,606 (7,008) (8,548) 136,203 13
12,083 11 1,182
693.001
10.739 S
2015
533,240 37,863 5,381 13,069 350 5,804 2,922
598,629
46,238 18,189 4,885
11.170
80.482
679,111
3,671 14,835 27,259
6,801 58,512 14,602
6,008
3,401 27,232 173,177 87,145 (5,408) 23,560 69,434 32 12,123 118,977
641,361
37.750
2014
526,851 39,571 9,486 4,925 630 5,290
8_
586,761
50,696 16,357 5,456
11,089 83,598 670,359
3,721 15,096 26.922 6,331 72,896 14,708 6,812 3,433 26,561 169,234 92,944 (19,449) 2,660 77,191 127 12,229 114,328 625,744 44,61 5
* The 2012 decrease resulted from a reduction in the liability estimate for OPEB.
158 STATISTICAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
2010
470,855 40,737 3,051 3,361 2,271 4,765 923
525,963
486,316 35,605 11,123 6,239 1,472 5,822
546.577
506,888 36,849 13,156 12,715 1,298 4,859 676
576,441
409.550 39,352 9,119 6,818 285 5,181 2.736
473.041
429,968 37,477 7,632 1,359 695 6,642
483,773
432,412 42,527 27,112 797 606 5,450
508,904
49,182 14,851 3,396
69,322 12,081 3,353
57,469 12,161 3,279
49,433 10,040 2,731
47,886 9,660 4,305
49,439 9,572 4,357
5,518
67,369
551,142
3,520 14,426 25,294 5,660 67,841 14,331 6,975 3,394 25,051 162,372 52,065 (19,567) 3,369 88,528 173 12,020 116,249
581,701
22,801
585,347
634.764
662.762
3,471 14,296 ' 24,689 5,694 63,103 13,714 5,942 3,175 4,332 161,919 78,360 (7,155) 25,738 75,496 147 12,459 111,044
609.426
57,073 S 57,142 $ (S2.363) S (111.620) S (12.179)
STATISTICAL SECTION 159
Exhibit 1-3
Fund Balances: Governmental Funds
Last Ten Fiscal Years
(modified accrual basis of accounting)
(in thousands ofdollars)
General Corporate Fund Nonspendable:
Prepaid insurance
Inventories Restricted
Unassigned (Deficit) Total General Corporate Fund
2017
4,101 34,787 306,854 (53,799)
291,943
2016
2,117 35,502 306,800 (44,428)
299,991
2015
2,137 37,623 305,779 (58,427)
287,112
2014
2,143 39,586 307,147 (61,850)
287,026
All Other Governmental Funds Nonspendable:
Prepaid insurance Restricted Assigned Unassigned
79
381,079 147,473 (79)
451,657 145,341 (13,525)
378,458 127,920 (9,090)
219,606 112,768
Total Governmental Funds
160 STATISTICAL SECTION
Metropolitan Hater Reclamation District of Greater Cliicago
2012 2012 2011 2010 2009 2008
$ 2,391 $ — $ — S — S — $ —
40,136 39,467 38,922 38,924 38,761 38,067
344,558 344,186 342,398 341,381 338,602 333,650
(51,960) (19,151) (96,225) (175.521) (166,687) (142,300)
335,125 364,502 285,095 204,784 210,676 229,417
328,953 575,796 763,064 519,456 773.035 464,633
112,478 — — — — —
S 776,556 S 940,298 S 1,048,159 $ 724,240 S 983,71 1 $ 694,050
STATISTICAL SECTION 161
Exhibit 1-4
Changes in Fund Balances: Governmental Funds
Last Ten Fiscal Years
(modified accrual basis of accounting) Revenues
General Revenues: Properly taxes
Personal property replacement tax Interest on investments Land sales
Tax increment-financing distributions Claims and damage settlements Miscellaneous Program Revenues: Charges for services User charges Land rentals
Fees, forfeits and penalties Capital grants and contributions Government grants Total revenues
Expenditures
Operations'
Board of Commissioners
General Administration
Monitoring and Research
Procurement and Materials Management
Human Resources
Information Technology j
Law
Finance
Engineering
Maintenance and Operations
Pension costs
Claims and judgments
Construction costs Debt service:
Redemption of bonds
Interest on bonds Total expenditures Revenues over (under) expenditures Other Financing Sources (Uses)
Payment to escrow agent
State revolving fund loan proceeds
Sale of refunding bonds
Proceeds from sale ol'bonds
Premium on sale of bonds
Proceeds from capital lease
Total other financing sources; (uses!
Net change in fund balance
Debt service as a percentage of non-capila! expenditures
2017
(in thousands oj dollars)
583,875 3S.961 6,181 1,233 9,228 209 5.540
2016
51,098 17,352 5,401
14,555
526,932 43,194 8,784 5(1 9,1 on 783 5,878
48.621 20.166 4,164
683,127
12.817
4.158 15.490 28,490
6.611 54,606 14.213
6,707
3.597 26.051 177.695 77,712
4.786 296.76S
102.670 1 17.474
730.995
4,075 15.766 29,696
5.954 54,225 12.728
5,922
3.530 26,068 179,181 75,579
6,905 268.497
921,341
113,695 119,520
(238,2 II)
937.028
(206.033)
175.245
(399.432) I 79.224 322.260 104.000 99.045
175,245
(62.969)
3 1 6%
305.097 99.064 S
28 4%
2015
525,302 37,863 5,381 3.164 13,069 350 5,869
46,238 18,189 4,885
11.165
671.475
3,662 ' 14,833 27,486
6.8S5 58.441 14,697
6,018
3.427 25,971 173,534 62,498
5,658 326.430
101.220 118,680
949.440
(277.965)
(82.906) 181.537
70.805 225.000
48.529
442.9h5
165.000
31 7%
2014
516,316 39,571 9,486 8
4,925 630 5,445
50,696 16,357 5,456
11,162 660,052
3,710 14,829 26,687
6,325 72,879 14,582
6,802
3.425 25.278 168,376 75,556 44,988 2.36,259
89.1 IS 110.115 898.929 (238,877)
81.721
81,721 (157.156)
2(» 9%
162 STATISTICAL SECTION
Metropolitan Water Reclamation District of Greater Chicago
2009
454.966 40.737 3,051 2.575 3,361 2,271 4,765
4X9,16X 35,605 11,123
6,239 1,472 5,822
492,751 36,849 13,156 2,326 12,715 1,298 4,859
410,663 39,352 9,119 3,045 6,818 285 5,181
418,077 37.477 7.632 6
1,359 695 6,642
399,917 42.527 27,112 6
797 606 5,450
49,182 14.851 3,396
69,322 12.081 3.353
57,469 12,161 2,534
49,433 10,040 2,731
47,886 9,660 4,305
49.439 9,572 4,357
11,110 590,265
22,164 656,349
17,218 653,336
20,233 556,900
1,440 535,179
896 540,679
3,514 14,111 25,128
5.671 67,856 14,024
6,984
3,393 23,987 161,787 67,523
4,970 199.231
3.463 13,S77 24,495 5,698 63,105 13,167 5,942 3.172 3,229 161,188 66,191 5.998 259,315
3,344 14,332 25,0X4 6,949 47,710 13.820 7,166 2,965 2,975 177,908 36,635 6,923 337,051
3.628 15.411 28,445 6,493 46,944 15,823 8,164 3,203 5,367 191,165 30,099 6,728 496,885
3.659 18.555 28,891 6,156 43.603 20.200 7.446 3.208 7,951 208,123 31,744 9,464 397.265
3.721 17,958 27,146 5.341 61.385 19,328 7,211 3.205 6,703 194,916 28,937 7,626 191,415
85,709 111,665
795,553
(205,288)
71.400 118.854
819.094
(162.745)
64,112 98,015
844.989
(191,653)
60,602 104,414
1.023,371
(466,471)
73.105 67.14S
926.5 18
(391.339)
112.577 66.591 754.060 (213,381)
(253) 78,481
400.000 37.344
41.185 (172.196)
28 8%
STATISTICAL SECTION 163
Exhibit 1-5
Equalized Assessed Value, Direct Tax Rate and Estimated Actual Value of
Taxable Property ,
Last Ten Fiscal Years
(in thousands ofdollars, except tax rates)
Fiscal Year Ended December 31,
Chicago Equalized Assessed Value
Suburbs Equalized Assessed Value
Total Equalized Assessed
Value
Total Direct Tax Rate(l)
Estimated Full Taxable Value (3)
Equalized Assessed Value as a Percentage of Full Value
S 73,645,316 $ 82,327,478 $ 155,972,794 0.263 $ 656,474,744 23.8%
80,977,543 89,119,839 170,097,382 0.252 616,163,594 27.6
84,586,808 89,880,835 174,467,643 0.261 550,135,370 31.7
82,087,170 84,830,896 166,918,066 0.274 449,811,540 37.1
75,122,914 73,925,579 149,048,493 0.320 442,787,689 33.7
65,250,387 68,147,608 133,397,995 0.370 414,382,389 32.2
62,363,876 61,055,668 123,419,544 0.417 459,860,597 26.8
64,908,057 60,828,131 125,736,188 0.430 499,136,554 25.2
70,963,289 59,341,515 130,304,804 0.426 ' 528,843,259 24.6
74,016,506 66,735,695 140,752,201 0.406 (3) 528,843,259 (2) 26.6
Source: Cook County Clerk for Equalized Assessed Values and Tax Rates and the Civic Federation for Estimated Full Values
Tax rates per $100 equalized assessed valuation.
Current data not available from Civic federation.
Does not include values for Railroad, Pollution Control or the part of O'Hare Airport located in DuPagc County.
164 STATISTICAL SECTION
Exhibit 1-6
District Direct Property Tax Rates, Overlapping Property Tax Rates of Major Local Governments, and Districted Tax Levies by Fund
Last Ten Fiscal Years
(rates per $100 of assessed value)
District direct rates
Corporate
Reserve Claim
Retirement
Debt Service
Construction
Stormwater Management
Total direct rate
2013
2012
2011
2016
2015
2014
S 0.141 0.004 0.015 0.083
0.144 0 001 0.016 0 094 0.005
0.014
0.135 0.002 0.016 0.097 0.006
0.005
0.168 0 002 0 019 0.114 0.001
0.016
0.175 0 004 0.044 0.175 0.013
0.019
S 0 182 0.005 0.042 0 163 0.009
0.016
0.179 0 005 0.021 0.135 0 015
0.015
0.161 0 004 0.047 0.160 0.010
0.024
0.183 0.002 0.040 0.174 0.014
0.017
2017 (1)
S 0.155 0.004 0.051 0.165 0.011
0.028
0.009
$ 0.414 $ 0.406 $ 0.430 S 0.430 $ 0.417 $ 0.370 S 0.320 $ 0 274 $ 0.261 $ 0.252
Major local governments' tax rates (2)
City of Chicago
Chicago Board of Education
Chicago Park District
Cook County
Cook County Forest Preserve Dist.
Community College #508 (City Coll)
City of Chicago Library Fund
City of Chicago School Bldg/lmprvmt
3 660 0 401 0.568
0.069
0.193
0.134
0.146
3.726 0.362 0.533
0 063
0.169
0.122
0 128
3.455 0 372 0 552
0.069
0.177
0.123
0.134
S 1.630 $ 1.549 $ 1.193 $ 1.209
3.671 0.402 0.560
0 069
0.198
0 135
0 152
2.5X1 0.319 0.423
0 051
0.151
0.102
0.116
2.366 0.309 0.394
0.049
0.150
0.099
0.1 12
3.422 0.395 0.531
0.063
0.190
0 128
0 146
2.X75 0 346 0.462
0 05X
0.165
0.111
0.119
1.151 $ 0.999 $ 0.914 S 0.8X7 % 0.928
2.472 0.323 0.415
0.051
0.156
0.102
0 117
District's tax levies by fund (in thousands)
Corporate
Stormwater Management
Reserve Claim
Retirement
Debt Service
Construction
Total lax levies
15,212 7.073 25,664 140,614
24,100 3,400 28,163 169.645 1.819
8.849 3,182 26,751 169,051 10.41 1
21,000 3,000 50.531 218.319 17.400
20,000 6,500 51,621 202.290 11,079
20,000 6,670 28,490 180.748 20.418
40,856 5,900 73,438 238,874 16,271
34,250 5,800 65.161 225.715 13.785
24,050 5.700 58.004 228.728 16.500
$223,946 $226,743 $227,196 $230,000 $224,400 $237,193 S249.82S $240,059 $237,116 $240,082
24,029 1,951
26,478 156.090 ' 8.749
$599,285 $571,454 $560,178 $540,250 $515,890 $493,519 $476,955 $457,356 $455.360 $428.645
Source: Cook County Clerk
District's tax rates arc estimated based on 2016 equalized assessed valuation of $141 billion.
Major local governments' rates for 2017 are not yet available
Exhibit 1-7
Principal Property Taxpayers
2016 and Nine Years Ago
Taxpayer
Wi 11 is Tower CME Center (2) Aon Center
Blue Cross Blue Shield Tower
One Prudential Plaza
Water Tower Place
300 N LaSalle
AT & T Corporate Center
Chase Tower
Citadel Center
Citicorp Center
Leo Burnett Building
Type of Business
Retail & Office Office Insurance Oflice
Financial Services Retail & Office Retail & Office Communications Banking Office Banking Advertising
2007
(in thousands ofdollars)
2016(1)
Equalized Assessed Value-
Percentage
Rank|1010|2 3 4 5 6 7 8 9 10
of Total Equalized Assessed Value
Rank
0.30% $ 514,662|910|0.19 364,783|910|0.18 374,456|910|0.18 — —
0.17 293,604|910|0.16 231,069|910|0.15 — —
0.15 297,653|910|0.14 250,261|910|0.14 208,906 10
— 216,217|910|— 211,813 9
Percentage of Total
Equalized Assessed Value
0.33%
0.23
0.24
0.19 0.14
0.19 0.16 0.13 0.15 0.14
.76% S 2,963,424
Source: Cook County Treasurer's Office and Cook County Clerk's Office
2017 information is unavailable.
Formerly referred to as Equity Office.
The Equalized Assessed Valuation for 2016 is 5140,752,201,171
166 STATISTICAL SECTION
Exhibit 1-8
Property Tax Levies and Collections
Last Ten Fiscal Years
Fiscal Year
Ended December 31
Taxes Levied for the Fiscal Year
(in thousands oj dollars)
Collected within the First Year
Percentage of Levy
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
428,645 455,360 457,356 476,955 493,573 514,659 540,666 555,098 571,454 593,135
400,048 383,612 435,009 460,618 476.881 497,452 523,203 541,008 559.938
93.3%
84.2
95.1
96.6
96.6
96.7
96.8
97.5
98.0
12/01/09 12/13/10 11/01/11 08/01/12 08/01/13 08/01/14 08/01/15 08/01/16 08/01/17 08/01/18
STATISTICAL SECTION 167
Exhibit 1-9
User Charge Rates
Last Ten Fiscal Years
2014(1)
Large Commercial/Industrial User Rates (2)
Flow per million gallons
5-day BOD per 1,000 lbs. (5)
SSper 1,000 lbs. (6)
259.61 229.13 142.47
255.02 234.95 148.33
250.51 240.49 154.08
246.08 245.75 159.72
Tax-Exempt User Rates (3) Flow per million gallons 5-day BOD per 1,000 lbs. (5) SSper 1,000 lbs. (6)
259.61 229.13 142.47
255.02 234.95 148.33
250.51 240.49 154.08
246.08 245.75 159.72
OM&R Rate (4)
The Large Commercial-Industrial and Tax-Exempt Users Rates are the same beginning with tax year 2014.
Large Commercial-Industrial Users are non-governmental, non-residential Users engaged in significant
commercial or industrial activities.
Tax-Exempt Users are exempt from payment of property taxes.
This rate represents the OM&R costs as a percentage ofthe District's total tax levy and it is applied to Commercial-
Industrial Users' real estate lax credits for determining their final User Charge.
BOD = Biochemical Oxygen Demand
SS = Suspended Solids
168 STATISTICAL SECTION
r
Metropolitan Water Reclamation District of Greater Chicago
2010
241.73 250.76 165.24
256.48 259.22 195.95
243.99 247.48 194.18
262.44 270.68 200.33
$ 229.37 231.90 ' 174.25
223.72 229.23 178.11
245.18 254.34 167.60
263.48 266.27. 201.24
250.31 253.89 199.21
269.25 $
277.70
205.53
235.96 238.56 179.25
230.29 235.98 183.35
0.5040
STATISTICAL SECTION 169
Exhibit 1-10
Ratios of Total General Bonded Debt and Net Bonded Debt Outstanding (1)
Last Ten Fiscal Years
(dollars and population in thousands, except debt per capita)
General Fiscal Obligation Year Bonds
Bono-Anticipation Notes and Interest
Capital Lease Payable (4)
Total Debt
Resources Available for
Repayment of Debt (2)
Net Debt
Total Debt as a % Personal Income (3)
Total Debt
per Capita
(3)
Net Debt as a % of Est Full Taxable Value (3)
Net Debt Per Capita (3)
2008 2009 2010 20ll 2012 2013 2014 2015 2016 2017
S 1,392,699 1,979,203 1,961,974 2.466,464 2.515,376 2,481.973 2,500,785 2,770,788 2,965,282 2,879,915
64,894 86,286 196,225 108,008 44,527 35,809 ¦ 90,460 161,697 157.390 296.529
5.3,6X8 51.784 49.838 47,795 45,653 43,405 41,047 38,574
$ 1,457,593 2,065,489 2,211,8X7 2.626,256 2.609,740 2.565.577 2,636,898 2,975.890 3,163.719 3,215.018
101,053 106,279 111,055 137.217 136.173 122,527 140,162 140.X06 I63,5()X 147,000
S 1,356,540 1,959,210 2,100,832 2,4X9.039 2.473.567 2.443.050 2.496,736 2,835,084 3,000,211
¦ 3,068,018
1.05% 1.46 1.44 1 87 1 79 I 73 1 S3 1.91 1.86 1.65
$ 277.00 392.01 422.12 503.50 506.75 489.52 495.S4 565.76 603.88 619.70
0 22%
0.36
0.47
0.56
0.60
0.53
0.50
0.57
0.60
0.58
S 257.80 371.84 400.92 477.19 480.30 466.14 469.49 538.99 572.67 591 37
Represents long-term debt for general bonded debt, and bond anticipation notes, including interest, which arc eventually
converted lo general bonded debt. Details ofthe District's long-term debt can be found in Ihe notes to the basic financial statements.
Represents the restricted fund balance in the Debt Service Fund.
See Exhibit I-13 for personal income and population information, and Exhibit 1-5 for estimated full taxable value information.
The District entered into a capital lease agreement in 2010.
170 STATISTICAL SECTION
Exhibit 1-11
Estimate of Direct and Overlapping Debt
As of December 31, 2017
(in thousands ofdollars)
Direct debt
Bonds and notes payable • S 2.697,667
Capital lease 38,574
% Applicable
Overlapping bonded debt of major local governments (I) Net Debt (2) Applicable (3) Amount
City of Chicago S 9,532,447 100.00% S 9,532,447
Chicago Board of Education (4)(5) 8,179,138 , 100.00 8.179,138
Chicago Park District (4) 821,000 100.00 821,000
City Colleges (District 508) (4) 315,560 100.00 315,560
Cook County 3,361,102 97.96 3,292,536
Cook County Forest Preserve District 151,010 97.96 147.929
Total overlapping debt (6) 22.288,610
Total direct and overlapping debt S 25.024.851
Excludes outstanding tax anticipation notes and warrants. Except as stated, does not include debt issued by other taxing
authorities in Cook County.
Source: Each of the respective taxing districts, current as of 12/31/2017.
Based on 2016 Equalized Assessed Valuations, which are the most recent available
Includes approximately S355 million, $237 million, $7.29 billion and $288 million of general obligation bonds ofthe Cily of
Chicago, City Colleges (District 508), Chicago Board of Education and the Chicago Park District, respectively, issued as "alternate revenue" bonds secured by alternate revenue sources.
Includes approximately $98 million of Public Building Commission Bonds debt.
Docs not include debt issued by other taxing authorities located in Cook County.
Exhibit 1-12
Computation of Statutory Debt Margin
Last Ten Fiscal Years
thousands ofdollars)
2017 (1) 2016 2015 2014
Equalized assessed valuation
Statutory debt limit (5.75% of" equalized assessed valuation)
Total debt applicable to debt limit:
General obligation bonds outstanding
Less: alternate bonds (2)
Adjusted general obligation bonds outstanding
Bond anticipation notes outstanding
Capital lease outstanding
Liabilities of tax financed funds:
Coiporatc
Stormwater
Debt service
Reserve claim
Construction
Total applicable debt
Less applicable assets:
Debt service funds unrestricted cash and investments
Interest payable in the next twelve months
Total applicable assets
Total net debt applicable to debt limit
Statutory debt margin
Total applicable net debt as a percentage of statutory debt limit
$140,752,201 5140,752,201 5130,304,804 $125,736,188
8,093,251 7,492,526 7,492,526 7,229,831
2,697,667 2,769,608 2,655,365 2,422,620
(98,145) (99,080) (50,000) —
2,599,522 2.670,528 2,605,365 2,422,620
296,529 157,390 161,697 90,460
38,574 41,047 43,405 45,653
21,650 27,952 23,647 37,136
1,715 2,062 6,973 5,689
273.999 174 205 681
3,171 3,368 4,812 6,648
2,961,435 2,902,521 2,846,104 2,608,887
115,673 115,673 108,671 108,392
(117,604) (117,604) (115,735) (106,175)
(1,931) (1,931) '•' (7,064) 2,217
2,963,366 2,904,452~ 2,853,168 2,606,670~
$ 5,129,885 $ 4,588,074 S 4,639,358 $ 4,623,161
36.6% 38.8%, 38.1%, 36.1%
Debt limit calculation based on 2016 equalized assessed valuation since 2017 value is not yet available.
Alternate bonds do not count against the debt limit.
Metropolitan Water Reclamation District of Greater Chicago
2013 2012 2011
$123,419,544 $133,397,995 $149,048,493
7,096,624 7,670,385 8,570,288
2,481,973 2,515,375 2,466,464
2,481,973 2,515,375 2,466,464
35,809 44,527 108,008
47,795 49,837 51.784
30,150 30,076 35,347
3,515 2,496 1,956
380 1,110 1,381
2,816 4,062 1,542
2,602,438 2,647,483 2,666,482
2010 2009 2008
$166,918,066 $174,467,643 $170,097,382
9,597,789 10.031,889 9,780,599
1,961,974 1,979,203 1,392,699
1,961,974 1,979,203 1,392,699
196,225 86,286 64,894
53,688 — —
45.381 45.260 42,374
2,496 1,101 1,470
410 327 1,036
1,732 4,236 2,855
2,261,906 2,116,413 1,505,328
98,006 105.285 114,344
(107,868) (109,300) (116,410)
(9,862) (4,015) (2,066)
2,612,300 2,651,498 2,668,548
S 4,484,324 $ 5,018,887 S 5,901,740
36.8% 34.6% 31.1%
88,710 88,849 89,397
(92,619) (59,873) (73.103)
(3,909) 28,976 16,294
2,265,815 2,087,437 1,489,034
$ 7,331.974 $ 7,944,452 $ 8,291,565
23.6%, 20.8% 15.2%,
STATISTICAL SECTION 173
Exhibit 1-13
Demographic and Economic Statistics
Last Ten Fiscal Years
Per Capita Median
Personal Personal Household Unemployment
(population and dollars in thousands)
Per
Personal Pe
Year Population Income Income Income Rate
2017 5,188 $ 186,434,150 S 35,936 $ 63,794 4.8%
2016 5,239 170,081,127 32,464 58,708 5.8
2015 5,260 155,734,043 29,607 54,461 5.8
2014 5,318 144,394,219 27,152 53,653 7.0
2013 5,241 148,352,487 28,304 51,391 9.1
2012 5,150 145,456,281 28,246 53,852 8.8
2011 5,216 140,483,393 26,933 54,036 9.8
2010 5,240 153,959,010 29,381 59,201 10.4
2009 5,269 141,675,329 26,888 53,709 10.1
2008 5,262 139,190,968 26,452 52,664 6.2
Source: Population, Personal Income and Median Household Income is for Cook County, Illinois. Population, Median Household Income and Personal Income infonnation is provided by The Nielsen Claritas Data Services, and unemployment information is provided by the U.S. Department of Labor, Bureau of Labor Statistics. The District service area represents 98% of the assessed valuation of Cook County.
Exhibit 1-14 Principal Employers
2017 and Nine Years Ago
2017
Percentage
of Total Employment (5)
Percentage of Total Rank Employment
U.S. Government (1) 41,500|99|0.80%
Chicago Public Schools (2) 35,447|99|0.68
City of Chicago 31,160|99|0.60
Cook County (3) 21,316|99|0.41
Advocate Health Care 19,049|99|0.37
Northwestern Memorial Healthcare (4) 16,667|99|0.32
University of Chicago,(2) 16,583|99|0.32
J.P. Morgan Chase & Co. 15,701|99|0.30
State of Illinois (2) 14,690 9 0.28
Amazon.Com Inc. (5) 13,240 10 0.26
Wal-Mart Stores Inc. — — —
Walgreen Company — — —
AT&T Inc. — — —
UAL Corp — — —
78,000 43,910 35,570 22,142 15,660
14,287
18,124
23,453 14,254 14,000 14,000
|1010 10|10 10
1.48%
0.83
0.68
0.42
0.30
0.27
0.34
0.45 0.27 0.27 0.27
293.400
fiscal year ends in September
Fiscal year ends in June
Fiscal year ends in November
Fiscal year ends in August
Includes Whole Foods employees
Source: Reprinted with permission, Grain's Chicago Business |,)anuary 15, 2018|. © Grain Communications, Inc.
STATISTICAL SECTION 175
Exhibit 1-15
Budgeted Positions by Fund/Department
Last Ten Fiscal Years
Budgeted Positions
Fund/Department 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008
General Corporate Fund
Board of Commissioners 38 38 37 37 37 37 40 45 45 45
General Administration 123 122 119 112 109 114 125 124 146 138
Monitoring and Research 309 308 297 288 286 280 303 308 308 309
Procurement and Materials
Management 63 63 63 62 62 62 69 70 70 70
Human Resources 141 73 74 72 58 57 59 60 54 54
Infonnation Technology 75 76 70 70 70 69 71 71 72 72
Law 38 38 37 36 38 37 38 40 40 40
Finance 28 28 29 29 29 29 31 31 31 33
Engineering (Corporate Fund) (1) 246 244 242 241 242 29 32 34 34 34
Maintenance & Operations 922 927 955 951 947 943 1.029 1.047 1,046 1,045
Total General Corporate Fund 1,983 1,917 1,923 1,898 1,878 1,657 1,797 1,830 1,846 1,840
Engineering (Construction Fund) (2)|9 9 9 9 9 9|21 28 45 45 45
F.ngineerinu (Stormwater
Management) 59 59 59 63 49 48 44 50 49 47
Engineerinii (Capital Improvements
liond Fund) (2)|9 9 9 9 9 9|196 202 191 191 177
Grand Total 2,042 1,976 1,982 1.961 1,927 1,922 2,071 2,116 2,131 2,109
Increase due to the transfer of positions from the Capital Improvements Bond and Construction Funds to the Corporate Fund
Decrease due to the transfer of positions from the Capital Improvements Bond and Construction Funds to the Corporate Fund
176 STATISTICAL SECTION
Exhibit 1-16 Operating Indicators
Last Ten Fiscal Years
Area
Served Communities
(1) Served (2)
Number
of People Served
(3)
Commercial and Industrial Population Equivalent Served
Number of Local Sewer Connections to
Intercepting Sewers
Gallons of Daily
Pumping Gallons of Sewage
(4)
Station Sewage Treatment
Maximum Processed Capacity
Capacity (4) per Day (4)
2017 2016 2015 2014 2013 2012 2011 2010 , 2009 2008
882 883 883 883 884 884 884 884 884 884
129 129 129 129 126 126 126 126 126 126
5,188,486 5,239,253 5,260,069 5,318,365 5,241,489 5,149,578 5,215,968 5,239,879 5,269,000 5,262,000
4,500,000 4,500,000 4,500,000 4,500,000 4,500,000 4,500,000 4,500,000 4,500,000 4,500,000 4,500,000
10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10.000 10.000
4,000,000 4,000.000 4,000,000 4,000,000 4,000,000 4,000,000 4.000,000 4,000,000 4.000,000 4,000,000
1,251,000 1,300,000 1,244,200 1,288,600 1,218,200 1,070,200 1,342,800 1.245,200 1,366,700 1,284.600
2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2.000,000 2,000,000 2,000,000 2,000,000
(1) In square miles
(2) Including the City of Chicago
(.3) Nielsen -- Claritas Data Service
(4) In thousands of gallons
Exhibit 1-17
Capital Asset Statistics
Last Ten Fiscal Years
2017 2016 2015 2014 2013 2012 2011 2010 2009 2008
Miles of intercepting sewers
anil force mains operated 560 560 560 560 560 559 559 559 559 559
Miles of waterway water
levels controlled 76 76 76 76 76 76 76 76 76 76
Acres of strip-mined land utilized for solids
processing 13,796+ 13.796 r. 13,796+ 13,796+ 13,796+ 13,796+ 13,796+ 13.796+ 13,796+ 13,796+
Number of water
reclamation plants 7777777777
Number of pumping stations 23 23 23 23 23 23 23 23 23 23
Miles of TARP tunnels constructed for pollution
and Hood control 109.4 109.4 109.4 109 4 109.4 109.4 109 4 109.4 109.4 109.4
Number of TARP reservoirs
constructed|99999|I I|99|I I 1
Number of TARP reservoirs
under construction|99|I|9999999|2 2
Number of Hood control
reservoirs 34 34 34 33 31 31 31 31 31 31
Instrcam aeration stations|9999999|2 .2 2 2
Sidcstream elevated pool
aeration stations|999999999|5 5
Source: District's Engineering Department
178 STATISTICAL SECTION
IV.
SINGLE AUDIT SECTION
Former Cubs pitcher Jason llammel, Cook County Sheriff Tom Dart, MWRD President Mariyana Spyropoulos and Ford Heights baseball players, coaches and residents unveil the new Excel! Walker Field. The MWRD collaborated with Cook County Sheriffs office, the Ford Heights Park District, the Baseball Tomorrow Fund, Cubs Charities, James McHugh Construction, the U.S. Army Corps of Engineers and other partners to deliver the state-of-the-art baseball field. The MWRD provided 110 tons of Class A exceptional quality (EQ) biosolids compost to help build up the turf playing surfaces. Biosolids compost supplies organic matter and improves soil structure and porosity to allow plants to more effectively utilize nutrients.
RSM US LLP
Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards
To the Honorable President and Members of the Board of Commissioners Metropolitan Water Reclamation District of Greater Chicago
We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, each major fund and the aggregate remaining fund information of Metropolitan Water Reclamation District of Greater Chicago (the District), as of and for the year ended December 31, 2017, and the related notes to the financial statements, and the respective changes in financial position thereof and the respective budgetary comparisons for the General Corporate Fund and the Retirement Fund for the year then ended, which collectively comprise the District's basic financial statements, and have issued our report thereon dated May 11, 2018. Our report includes a reference to other auditors who audited the financial statements of the District's Pension Trust Fund as described in our report on the District's financial statements. This report does not include the results of the other auditors' testing of internal control over financial reporting or compliance and other matters that are reported separately by those auditors.
Internal Control Over Financial Reporting
In planning and performing our audit ofthe financial statements, we considered the District's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control. Accordingly, we do not express an opinion on the effectiveness of the District's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
THE POWER OF BEING UNDERSTOOD
-¦¦UD " SAX : CONSULTING
180 SINGLE AUDIT SECTION
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the District's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Chicago, Illinois May 11, 2018
SINGLE AUDIT SECTION 181
p>= PRADO & RENTERIA
1^.17^. Certified Public Accountants
1837 S. Michigan Ave., Chicago, Illinois 60616 tel (312) 567-1330 fax (312) 567-1360 www.pradorenteria.com
INDEPENDENT AUDITORS' REPORT
The Honorable President and
Members ofthe Board of Commissioners
Metropolitan Water Reclamation District of Greater Chicago
Report on the Schedule of Expenditures of Federal Awards
Wc have audited the accompanying Schedule of Expenditures of Federal Awards (the "Schedule"') ofthe Metropolitan Water Reclamation District of Greater Chicago (the "District"), for the year ended December 31,2017 and the related notes to the Schedule.
Management's Responsibility for the Schedule of Expenditures of Federal Awards Management is responsible for the preparation and fair presentation of this financial statement in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statement that is free from material misstatement, whether'due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and the audit requirements of Title 2 U.S. Code of Federal Regulation Part 200, Uniform Administrative Requirements. Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement. The procedures selected depend on the auditor's judgment, including the assessment ofthe risks of material misstatement ofthe financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statement in order to design audit procedures that arc appropriate in the circumstances, but not ("or the purpose of expressing an opinion on the effectiveness ofthe entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation ofthe financial statement
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
182 SINGLE AUDIT SECTION
Opinion
In our opinion, the financial statement referred to above presents fairly, in all material respects, the expenditures of federal awards ofthe District for the year ended December 31, 2017, in accordance with accounting principles generally accepted in the United States of America.
Report on Other Legal and Regulatory Requirements
Chicago, Illinois May 11,2018
In accordance with Title 2 U.S. Code of Federal Regulation Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), we have also issued a report dated May 11, 2018 on our consideration of the District's compliance with requirements that could have a direct and material effect on the major program and on internal control over compliance in accordance with the Uniform Guidance. That report is an integral part of an audit performed in accordance with the Uniform Guidance and should be read in conjunction with this report.
SINGLE AUDIT SECTION 183
PRADO& RENTERIA
Certified Public Accountants
1837 S. Michigan Ave., Chicago, Illinois 60616 tel (312) 567-1330 fax (312) 567-1360 www.pradorenteria.com
INDEPENDENT AUDITORS'REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY
THE UNIFORM GUIDANCE
The Honorable President and
Members of the Board of Commissioners
Metropolitan Water Reclamation District of Greater Chicago
Report on Compliance for the Major Federal Program
We have audited the Metropolitan Water Reclamation District of Greater Chicago's (the "District") compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on the District's major federal program for the year ended December 31,2017. The District's major federal program is identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs.
Management's Responsibility
Management is responsible for compliance with the federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs.
Auditor's Responsibility
Our responsibility is to express an opinion on compliance for the District's major federal program based on our audit ofthe types of compliance requirements referred to above. Wc conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Costs -Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the District's compliance with those requirements and performing such other procedures as we considered necessary in (he circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for the major federal program. However, our audit does not provide a legal determination of the District's compliance.
184 SINGLE AUDIT SECTION
(
Opinion on the Major Federal Program
In our opinion, the District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on its major federal program for the year ended December 31, 2017.
Report on Internal Control over Compliance
Management of the District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the District's internal control over compliance with the types of requirements that could have a direct and material effect on the major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for the major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, wc do not express an opinion on the effectiveness of the District's internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, ordetect and correct, noncompliance withatypeofcompliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis, ^.significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. Wc did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
Chicago, Illinois May 11, 2018
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements ofthe Uniform Guidance. Accordingly, this report is not suitable foranyotherpurpo.se .
SINGLE AUDIT SECTION 185
Schedule of Expenditures of Federal Awards
Year ended December 31, 2017
Federal
Federal Grantor/Pass-Through Grantor/ CFDA Program or Cluster Title Number
Pass-Through
Entity Total
Identifying Award Pass-Through Federal
Number Date to Subrccipicnts Expenditures
U.S. Environmental Protection Agency
Passed through Illinois Environmental Protection Agency Capitalization Grants for Clean Water State Revolving Funds
Project Descriptions
66.458 L174621 May 2014 — 543.900
66.458 L174923 May 2013 — 386,400
66.458 L175152 March 2016 — 752,200
66.458 L175223 December 2015 — 481,600
66.458 L175263 May 2016 — 1,732.700
66.458 L175342 July 2016 — 3,258.900
66.458 L175366 May 2016 — 529,500
66.458 L17536X August 2016 — 173.400
66.458 L175371 October 2016 — 234,000
66 458 L175372 October 2016 - 89,400
Westside Primary Settling Tanks 1-9 66.458 L174555 December 2016 — $ 5.362,400
and Aerated Grit Facility, SWRP
Des Plaincs River Intercepting Sewer Rehabilitation, SSA
Calumet TARP Pumping Station Improvements. Calumet WRP
A/13 and C/D Service Tunnel Rehabilitation - Phase Two, SWRP
D799 Switchccar Replacement, SWRP
Calumet Intercepting Sewer 19F Rehabilitation. CSA
McCook Reservoir Des Plaincs Inflow Tunnel, SSA
Conversion of Old GCTs to WASSTRIP Process, SWRP
Safely Railing Around Tanks, SWRP
SafeTv Railing Around Tanks. CWRP
Safety Railing Around Tanks. OWRP
McCook Reservoir Expanded Stage 2 66 458 1.175460 May 2017 — 895.200
Slope Stabilization & Retaining Walls,
SWRP
Total U S Environmental Protection Agency
Funding of Capitalization Grants for Clean
Water Stale Revolving I'uiuls S 14.439,600
Total Federal Expenditures S 14,439,601)
See Accompanying Notes to Schedule of Expenditures of federal Awards
186 SINGLE AUDIT SECTION
Notes to Schedule of Expenditures of Federal Awards
Year ended December 31, 2017
Note 1 - Basis of Presentation
The accompanying Schedule of Expenditures of Federal Awards (the "Schedule") includes the federal award activity of the Metropolitan Water Reclamation District of Greater Chicago (the "District") under programs of the federal government for the year ended December 31,2017. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulation Part 200, Uniform Administrative Requirements. Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the District, it is not intended to and does not present the financial position and the respective change in financial position ofthe District.
Note 2 - Summary of Significant Accounting Policies
Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures arc recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement.
Note 3 - Indirect Cost Rate
The District has not elected to use the 10% de minimis indirect cost rate allowed under the Uniform Guidance. Note 4 - Program Description
CFDA # 66.458 - Capitalization Grants for Clean Water State Revolving Funds
The Capitalization Grants for Clean Water State Revolving Funds create State Revolving Funds (SRFs) through a program ofcapitalization grants to states, which will provide a long-term source of state financing for construction of wastewater treatment facilities and implementation of other water quality management activities. I he capitalization grant is deposited in the SRF, which is used to provide loans and other types of financial assistance, but no grants, to local communities and inter-municipal and interstate agencies. The States must agree to enter into binding commitments with recipients to provide financial assistance from the SRF in an amount equal to 16.67% ofthe total SRF loan, with the federal share being 83.33%. Those loans awarded under the American Recovery and Reinvestment Act of 2009 (ARRA) are funded 50% from ARRA funds and 50% from SRFs. There were no loans awarded under ARRA for the year ended December 31, 2017.
Note 5 - Project Descriptions
Descriptions of projects, funded wholly or partially by federal sources, for which the District received funds during the year ended December 31, 2017:
State Revolving Fund Loans
Loan #L 174555 was awarded to the District on December 6, 2016, under Public Law 95-21 7 (Federal Water Pollution Control Act). The loan provides for the Wcstsidc Primary Settling Tanks I -9 and Aerated Grit Facility, SWRP. Project 04-128-3P. The maximum SRF loan amount is $150,545,633. The maximum pass through federal funding is $ 125,449.676. A total of $5,362,400 in federal funds was disbursed by the IEPA during fiscal year 2017. As of December 31, 2017, $122,467,139 was outstanding. The outstanding SRF loan amount is presented as a bond anticipation note in the District's financial statements.
SINGLE AUDIT SECTION 187
Notes to Schedule of Expenditures of Federal Awards
Year ended December 31, 2017
Note 5 - Project Descriptions - Continued
Loan #L174621 was awarded to the District on May 8, 2014, under Public Law 95-217 (Federal Water Pollution Control Act). The loan provides for Des Plaincs River Intercepting Sewer Rehabilitation, SSA, Project 06-158-3S. The maximum SRF loan amount is $13,628,725. The maximum pass through federal funding is SI 1,356,817. A total of $543,900 in federal funds was disbursed by the IEPA during fiscal year 2017. As of December 31,2017, $544,673 was outstanding. The outstanding SRF loan amount is presented as a bond anticipation note in the District's financial statements.
Loan #L174923 was awarded to the District on May 2, 2013, under Public Law 95-217 (Federal Water Pollution Control Act). The loan provides for Calumet TARP Pump Station Improvements, Project 06-212-3M. The maximum SRF loan amount is $32,893,059. The maximum pass through federal funding is $27,409,786. A total of $386,400 in federal funds was disbursed by the IEPA during fiscal year 2017. As of December 31, 2017, $31,171,133 was outstanding. The outstanding SRF loan amount is presented as a bond anticipation note in the District's financial statements.
Loan #L175152 was awarded to the District on March 25, 2016, under Public Law 95-217 (Federal Water Pollution Control Act). The loan provides for A/B and C/D Service Tunnel Rehabilitation - Phase Two, SWRP, Project 04-132-3D. The maximum SRF loan amount is $21,111,910. The maximum pass through federal funding is $17,592,555. A total of $752,200 in federal funds was disbursed by the IEPA during fiscal year 2017. As of December 31, 2017, $ 12,762,686 was outstanding. The outstanding SRF loan amount is presented as a bond anticipation note in the District's financial statements.
Loan #L175223 was awarded to the District on December 15, 2015, under Public Law 95-217 (Federal Water Pollution Control Act). The loan provides for D799 Switchgear Replacement, SWRP, Project 09-182-3E. The maximum SRF loan amount is $9,800,000. The maximum pass through federal funding is $8,166,340. A total of $481,600 in federal funds was disbursed by the IEPA during fiscal year 2017. As of December 3 1, 2017. $4,117,506 was outstanding. The outstanding SRF loan amount is presented as a bond anticipation note in the District's financial statements.
Loan #L175263 was awarded to the District on May 27, 2016, under Public Law 95-217 (Federal Water Pollution Control Act). The loan provides for Calumet Intercepting Sewer 19F Rehabilitation, CSA, Project II-239-3S. The maximum SRF loan amount is $12,746,856. The maximum pass through federal funding is SI0.621,955. A total of S1,732,700 in federal funds was disbursed by the IEPA during fiscal year 2017. As of December 31,2017, $ 10,170,251 was outstanding. The outstanding SRF loan amount is presented as a bond anticipation note in the District's financial statements.
Loan #L175342 was awarded to the District on July 26, 2016, under Public Law 95-217 (Federal Water Pollution Control Act). The loan provides for McCook Reservoir Des Plaincs billow Tunnel, SSA, Project 13-106-4F. The maximum SRF loan amount is S80.000.000. The maximum pass through federal funding is $66,664,000. A total of $3,258,900 in federal funds was disbursed by the IEPA during fiscal year 2017. As of December 31, 2017, 558,455,509 was outstanding. The outstanding SRF loan amount is presented as a bond anticipation note in the District's financial statements
Loan #L175366 was awarded to the District on May 27, 2016, under Public Law 95-217 (Federal Water Pollution Control Act). The loan provides for Conversion of Old GCTs to WASSTRIP Process, SWRP, Project 15-120-3P. The maximum SRF loan amount is $5,374,018. The maximum pass through federal funding is $4,478,169. A total of $529,500 m federal funds was disbursed by the IEPA during fiscal year 2017. As of December 3 1, 2017, $4,376,621 was outstanding. The outstanding SRF loan amount is presented as a bond anticipation note m the District's financial statements.
188 SINGLE AUDIT SECTION
Notes to Schedule of Expenditures of Federal Awards
Year ended December 31. 2017
i
Note 5 - Project Descriptions - Continued
.Loan #L175368 was awarded to the District on August 4, 2016, under Public Law 95-217 (Federal Water Pollution Control Act). The loan provides for Safety Railing Around Tanks, SWRP, Project 15-123-3D. The maximum SRF loan amount is S5,386,512. The maximum pass through federal funding is 54,488,580. A total of 5173.400 in federal funds was disbursed by the IEPA during fiscal year 2017. As of December 31, 2017, 55,123,953 was outstanding. The outstanding SRF loan amount is presented as a bond anticipation note in the District's financial statements.
Loan #L175371 was awarded to the District on October 31, 2016, under Public Law 95-217 (Federal Water Pollution Control Act). The loan provides for Safety Railing Around Tanks, CWRP, Project 15-265-3D. The maximum SRF loan amount is Sl,497,033. The maximum pass through federal funding is $1,247,478. Atotal of 5234,000 in federal funds was disbursed by the IEPA during fiscal year 2017. As of December 31,2017, $ 1,309,512 vyas outstanding. The outstanding SRF loan amount is presented as a bond anticipation note in the District's financial statements.
Loan #L175372 was awarded to the District on October 27, 2016, under Public Law 95-217 (Federal Water Pollution Control Act). The loan provides for Safety Railing Around Tanks, OWRP, Project I5-072-3D. The maximum SRF loan amount is $1,442,000. The maximum pass through federal funding is $1,201,619. A total of $89,400 in federal funds was disbursed by the IEPA during fiscal year 2017. As of December 31,2017, $1,429,788 was outstanding. The outstanding SRF loan amount is presented as a bond anticipation note in the District's financial statements.
Loan #L 175460 was awarded to the District on May 12, 2017, under Public Law 95-217 (Federal Water Pollution Control Act). The loan provides for McCook Reservoir Expanded Stage 2 Slope Stabilization and Retaining Walls, SWRP, Project 16-125-4F. The maximum SRF loan amount is 57,546,837. The maximum pass through federal funding is $6,288,780. A total of$895,200 in federal funds was disbursed by the IEPA during fiscal year 2017. As of December 31, 2017, $4,483,130 was outstanding. The outstanding SRF loan amount is presented as a bond anticipation note in the District's financial statements.
SINGLE AUDIT SECTION 189
Schedule of Findings and Questioned Costs
Year ended December 31, 2017
SECTION I - SUMMARY OF AUDITORS' RESULTS
Financial Statements
Type of report the auditor issued on whether the financial statements
audited were prepared in accordance with GAAP: Unmodified
Internal control over financial reporting:
Material weakncss(es) identified? Yes X No
Significant deficiency(ies) identified? Yes X None reported
Noncompliance material to financial statements noted? Yes X No
Federal Awards
Internal control over major programs:
Material weakness(es) identified? Yes X No
Significant deficiency(ics) identified? Yes X None reported
Type of auditors' report issued on compliance for major federal programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)?
Yes X No
Identification of major federal programs: U.S. Environmental Protection Agency
CFDA Number Name of Federal Program or Cluster
66.458 Capitalization Grants for Clean Water State Revolving Funds
Dollar threshold used to distinguish between Type A and Type B programs: 5750,000
Auditce qualified as low-risk auditee? X Yes No
SECTION II - FINANCIAL STATEMENT FINDINGS - Required to be Reported in Accordance with Governmental Auditing Standards
None.
SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
None.
SECTION IV - SUMMARY OF PRIOR YEAR AUDIT FINDINGS
None.
190 SINGLE AUDIT SECTION
In memory of
TIMOTHY BRADFORD
Commissioner
Metropolitan Water Reclamation District of Greater Chicago
2014-2017
192 SINGLE AUDIT SECTION